Czech industrial production slumps sharply in July on lower number of working days

Czech industrial production slumped sharply in July on holidays and lower number of working days, according to Czech Statistics Office. Industrial output in the Czech Republic fell 14.1 percent year-on-year. On the working-days adjusted basis, the output declined less severely by 7.6 percent. In sequential terms, seasonally adjusted industrial output dropped 9.7 percent. The value of new orders fell 16.2 percent year-on-year.

The severe decline in the output is mainly because of the automotive industry. Automotive industry’s output contracted over one-third in July. As the carmakers’ summer breaks have been floating in summer months, their focus in July 2016 as compared to July 2015 might give explanation for the severe decline in the industry, said KBC Market Research in a research note.

“Because of the suspected ‘holidays effect’, we do not consider the July outcome of the industry a ‘tragedy’. Moreover, situation in the Czech industry looks significantly better in terms of new orders, which dropped much less than production”, added KBC Market Research.

The Czech National Bank’s governor Rusnok stated yesterday that the central bank might abandon its intervention floor in mid-2017 even if the headline inflation is lower than the 2 percent target at the time. Rusnok added that it would be enough if the outlook of inflation indicates inflation heading above target.

“We see the headline inflation at around 1.7 percent y/y in the mid of next year”, added KBC Market Research.