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Czech Output Decline Signals Recession May Stretch to Record

Jan. 7 (Bloomberg) -- Czech industrial output fell more than analysts forecast in November, signaling the economic recession may stretch into the longest on record and spark further monetary easing.

Output decreased 3.9 percent from a year earlier, compared with a 4.1 percent increase in October, the Czech Statistics Office in Prague said in a statement on its website today. The result was worse than the median forecast for a 1.1 percent drop in a Bloomberg survey of 13 analysts.

The economy is suffering from weak domestic demand as households and businesses cut spending due to government austerity programs and the euro area’s debt crisis. The central bank is in uncharted territory after cutting the benchmark rate to effectively zero, while several policy makers have mentioned selling the koruna to further relax conditions as the economic slump risks stretching into the longest ever.

The forward-looking data “are sending a negative message about the near-term outlook of activity in Czech industry,” Radomir Jac, chief economist at Generali PPF Asset Management in Prague, said in an e-mail. “November statistics are supportive of expectations that Czech GDP will report a quarterly contraction in the final quarter of 2012.”

The koruna lost 0.4 percent to 25.484 against the euro by 11:36 a.m. in Prague, the weakest level since Nov. 22.

Rubber Output

Adjusted for the difference in the number of working days, industrial output fell 6.2 percent in November, compared with a 3.3 percent decline in the previous month, the statistics office said. Production of rubber and plastic products declined 15.6 percent in November, contributing 1 percentage point to the fall of the total figure, it said.

Gross domestic product shrank for a third three-month period from July to September, matching the longest quarterly declines recorded three years ago and in 1997, according to latest data from the statistics office.

The foreign trade surplus rose to 35.5 billion koruna ($1.8 billion) in November from 35.2 billion koruna in the previous month, the office said in a separate statement. Exports rose 4.2 percent from a year earlier, while imports declined 2.4 percent.

The trade surplus reflects weakness of domestic demand, according to Jaromir Sindel, an economist at Citigroup Inc. in Prague.

“This suggests either renewed weakness of investment activity or that the milder contraction of private consumption reported in the third quarter is a mirage,” Sindel said in an e-mail. “Data support further easing of monetary conditions.”

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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