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PMI signals steep expansion in Czech Republic, despite dipping to nine-month low

Staff Writer | June 6, 2018
The latest PMI survey data from IHS Markit indicated steep, albeit softer growth across the Czech manufacturing sector in May.
Czech manufacturing
Czech Republic   Output levels at Czech manufacturers continued to rise sharply
The overall expansion was supported by strong, but weaker upturns in output and new orders.

The rate of increase in new export business also eased and was the weakest since December 2016.

In line with a slight reduction in pressure on capacities, employment levels expanded at the slowest pace since October 2016.

On the price front, rates of both input cost and output charge inflation softened but remained marked and solid respectively.

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 56.5 in May, down from 57.2 in April, the latest PMI figure signalled a sharp expansion across the Czech goods-producing sector.

That said, the rate of increase was the softest since last August, indicating a further loss of growth momentum as seen throughout 2018 so far.

Output levels at Czech manufacturers continued to rise sharply, albeit at a softer pace.

Panellists suggested that rises in production were due to greater client demand, especially among domestic customers.

Even so, the rate of expansion was the slowest since last August.

Similarly, new orders received by manufacturers increased further in May, but at a slightly weaker pace.

Although the rate of growth dipped to a ninemonth low, the upturn remained robust by historical standards.

New export orders expanded solidly, albeit at the softest pace since December 2016.

In line with slightly weaker pressure on operating capacity, the rate of job creation eased to the slowest since October 2016.

That said, the latest expansion in staff numbers was still solid overall.

Backlogs continued to accumulate at a strong rate, but one that was much slower than seen at the end of 2017.

Meanwhile, input costs rose markedly, despite the rate of inflation softening to a nine-month low.

Output charge inflation also slowed to the weakest since August 2017.

That said, panellists continued to note supplier constraints and input shortages as key factors behind price rises.

Vendor performance deteriorated further in May, and to a greater extent than the series average.

Longer supplier delivery times were commonly cited as a key factor behind the creation of safety stocks, with May seeing the fastest rise in pre-production inventories since August 2007.

Finally, business expectations towards the yearahead outlook for output remained robust in May, despite the degree of confidence dipping to a 17- month low.

Panellists linked optimism to more favourable market conditions. â–