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June PMI signals sharp improvement in manufacturing in Czech Republic

Staff Writer | July 3, 2018
The latest PMI survey data from IHS Markit signalled a sharp improvement in business conditions across the Czech manufacturing sector in June.
manufacturing Czech Republic
Europe   Output charges increased sharply
Output and new orders expanded at faster rates, with employment levels increasing solidly.

In line with a further deterioration in supplier delivery times, input prices rose at the quickest pace for three months.

Output charges also increased sharply as firms partly passed on higher costs to clients.

Meanwhile, business confidence improved, driven by sustained growth in new orders and investment in technology.

The headline IHS Markit Czech Republic Manufacturing PMI is a composite single-figure measure of manufacturing performance.

It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases.

Any figure greater than 50.0 indicates overall improvement in the sector.

At 56.8 in June, up from 56.5 in May, the latest reading signalled a steep and faster improvement across the manufacturing sector.

The second quarter saw a sharp expansion overall, albeit one that was the weakest since the third quarter of 2017.

The stronger overall PMI reading was aided by a faster expansion in output in June.

Despite being the second-weakest since August 2017, the rate of growth was sharp nonetheless.

The latest increase in production was largely attributed by panellists to greater demand from domestic and foreign clients, and investment in capacity expansion.

New order growth at goods producers was also steep, accelerating from May’s nine-month low.

The rise in new business was faster than the long-run average, despite being below the rates seen around the turn of the year.

The export component of new orders also increased in June, and at a solid pace.

In line with a marked lengthening in suppliers’ delivery times, input cost inflation accelerated in June.

The rate of increase was the fastest for three months, with anecdotal evidence highlighting upward pressure from higher prices for steel, aluminium, copper and plastics.

Meanwhile, average charges for goods increased at a sharp rate, as firms passed higher costs onto clients.

The pace of inflation was the quickest since March.

In line with the rate of output growth outstripping that of new orders, backlogs increased at a weaker pace in June.

Moreover, the rise in outstanding business was the slowest for ten months.

Employment growth was also below the average for 2018 so far, despite accelerating from May’s 19- month low.

Business confidence, however, was robust in June.

The level of optimism increased and was above the long-run series average.

Anecdotal evidence suggested that investment in new technology, a sustained upturn in new orders and access to new export markets were key factors driving strong expectations.


 

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