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Industry to slow down next year

14.12.2011 - 13:56 | Pick of the Week

In October, industrial production maintained the growth dynamics from the previous month and increased 1.7% year on year. According to the Czech Statistical Office (ČSÚ), the biggest contributors were motor vehicle production (+16.6% year on year), metal structures and metal products manufacturing (+3%) and electric devices production (+3.4%). According to Czech Chamber of Commerce president Petr Kužel, the October data attest to the still relatively good condition of the Czech industry, despite the pace of this key economic segment slowing down significantly in the past few months. Total revenues still increased, however, without exports the industry would be in a deep downturn, according to Kužel. This fact is proven by the October increase of new orders from abroad by 8.4%, while local contracts dropped 7.8% year on year.

Despite positive developments in the automotive industry and foreign contracts, lower European and global demand is beginning to show in the October results, according to Ministry of Industry and Trade Economic Analyses department director Jaroslav Vomastek. Within this context, one can expect worsening of industrial production in the months to come. According to Vomastek, this development is hinted at by all advance indicators, for instance the decrease in the Purchasing Managers Index (PMI) below the level of 50 points. According to the ČSÚ data, the largest decrease was recorded in computer production, food production and chemical substances production.

Overall for the period of January to October 2011, industrial production grew 7.6% year on year, industrial activities revenues by 7.8% and new contracts in this segment by 6.1%. According to Petr Smutný, PwC Czech Republic Business Finance and Restructuring partner, this year's development is a success that will not be repeated. According to Smutný, next year companies are expecting a crisis similar to the one of 2008 that may be shallower, but longer. Petr Kužel adds that corporate concerns are related mainly to the eurozone's debt crisis, far less to the growing commodity prices or exchange rate fluctuation. He considers it of key importance for the government, within the framework of austerity measures, not to negatively affect the Czech business sphere. As particular support measures, Kužel proposes for instance the introduction of reduced working hours that would help companies keep skilled labour.

Autor: Jan Neubert, redaktor ČIA

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