Czech Republic PMI May 2021

Czech Republic

Czech Republic: Strongest improvement in operating conditions on record amid soaring price pressures in May

June 1, 2021

The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, came in at 61.8 in May, up from April’s 58.9 and marking the highest reading on record. Therefore, the index moved further above the critical 50-threshold separating improvement from deterioration in operating conditions of the manufacturing sector.

May’s print largely reflected stronger expansions in new orders and production. Moreover, employment grew at the fastest pace in over three years due to mounting pressures on capacity as supply chain disruptions intensified. Raw material shortages and longer delivery times in turn translated into a fresh record-high input cost inflation, driving output charges up at the strongest pace on record as well. Lastly, business sentiment grew more upbeat amid hopes of an end to the pandemic and rising client demand.

Commenting on the release, Sian Jones, economist at HIS Markit, stated:

“The latest rise in producer cost burdens could cause concern over the coming months if the increase appears to be being fed through to consumer prices. We currently anticipate a rate hike by the Czech National Bank in August, with the potential for a second interest rate rise at a later stage of the second-half of 2021."

FocusEconomics Consensus Forecast participants see fixed investment growing 3.6% in 2021, which is down 0.7 percentage points from last month’s projection, and expanding 6.1% in 2022.

Author: Massimo Bassetti, Senior Economist

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