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Sustained fall in production in Czech Republic

Christian Fernsby ▼ | November 4, 2019
October PMI survey data signalled a further deterioration in the health of the Czech manufacturing sector.

KEY POINTS
  • Despite a drop in new order volumes, firms increased their charges for the first time in three months
  • The headline PMI reached a four-month high
  • That said, the rate of contraction signalled by the index remained strong overall

Czech Republic
Europe   Lower client demand led firms to cut their workforce
The decline was led by further substantial, albeit slower, contractions in production and new orders.

Notably, lower client demand led firms to cut their workforce numbers at the quickest pace since November 2009.

In turn, manufacturers expressed negative sentiment towards output over the coming year for the first time since December 2012, as hopes of a pick-up in demand waned.

Meanwhile, lower demand for inputs led to quicker supplier deliveries and only a fractional rise in costs.

Despite a drop in new order volumes, firms increased their charges for the first time in three months.

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 45.0 in October, up slightly from 44.9 in September, the headline PMI reached a four-month high.

That said, the rate of contraction signalled by the index remained strong overall and was among the fastest recorded since mid-2009.

Production decreased across the manufacturing sector for the eleventh successive month in October, albeit at the softest pace since April.

A decline in new business reportedly drove the moderate contraction.

Moreover, a downturn in domestic and foreign demand led to further marked falls in new orders and new export business.

Although the rates of decline eased slightly, they remained among the quickest since 2009 amid reports of a drop in sales to key export partners and clients in the automotive sector.

Amid challenging demand conditions, manufacturers registered the sharpest fall in workforce numbers for almost a decade in October.

The strong decrease was linked to lower production requirements and efforts to cut costs.

A reduction in new order volumes also allowed firms to clear their backlogs of work at the quickest rate for three months.

Meanwhile, firms expressed the lowest degree of sentiment towards future output since late-2012.

Manufacturers expect production to fall over the coming 12 months amid sustained contractions in domestic and foreign demand.

On the price front, input costs rose only fractionally at the beginning of the fourth quarter as lower demand for inputs limited supplier pricing power.

Output charges, however, increased for the first time since July despite weak demand conditions.

Finally, buying activity showed one of the fastest falls since 2012, while lower production requirements also meant stocks of purchases were reduced at a steep rate.

Postproduction inventories, meanwhile, rose moderately. â– 


 

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