Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Czech Industry Output Unexpectedly Rises in Recovery Sign

Don't Miss Out —
Follow us on:

Oct. 7 (Bloomberg) -- Czech industrial output unexpectedly grew in August, exceeding all but one of economist forecasts and underpinning an economic recovery that’s keeping the central bank from starting currency interventions.

Industrial output rose 1.6 percent from a year earlier, boosted by a 26.1 percent increase in car production, after 2.1 percent growth in July, the Czech Statistics Office in Prague said in a statement today. The median estimate in a Bloomberg survey of 16 analysts was for a 1.3 percent decline.

The $196 billion economy is showing signs of a rebound after rising exports in the second quarter helped end an 18-month recession even as domestic demand remained weak. Following three interest rate cuts to effectively zero last year, central bankers are debating whether inflation below the 2 percent target warrants the first koruna sales in 11 years.

“The recovery of the Czech economy continues, and that’s good news that may have a positive impact on the koruna,” Michal Brozka, chief analyst at Raiffeisenbank As in Prague, said by e-mail. “But threats of central bank interventions should limit any bigger appreciation moves.”

The currency has shifted to the center of policy deliberations because its depreciation would make imports more expensive and boost the competitiveness of exports, curbing deflation risks.

The koruna has strengthened 1.3 percent to the euro since Sept. 25, one day before the central bank voted to reject starting the interventions at a policy meeting. It traded 0.2 percent stronger at 25.532 per euro as of 11:42 a.m. in Prague, according to data compiled by Bloomberg.

Hyundai, VW

Second-quarter gross domestic product grew 0.6 percent from the previous three months, ending six consecutive quarters of contraction. The HSBC Purchasing Managers’ Index signaled growth in manufacturing for a fifth month in September and the economic sentiment indicator rose to the highest in 18 months.

Exports, which account for about 80 percent of Czech GDP, are led by manufacturers including the factories of carmakers Hyundai Motor Co., Volkswagen AG’s Skoda Auto AS, Peugeot SA and Toyota Motor Corp.

The central bank rejected a proposal to start koruna sales on Sept. 26 because a majority of policy makers didn’t see a “significant risk” of deflation, according to minutes from the meeting.

Consumption, Growth

While most board members agreed the probability of starting the currency interventions remained high and was unchanged from the previous meeting, some rate setters said weakening the exchange rate now would risk damping private consumption and curbing economic growth.

Retail sales dropped 0.3 percent from a year earlier in August, a smaller decline than the 1.2 percent median estimate in a Bloomberg survey of 12 economists. They rose 1.3 percent when adjusted for working-days difference.

Industrial orders rose 12.3 percent from a year earlier in August, with export orders increasing 15.6 percent, the statistics office said today.

“All in all, good news, which should reassure the Czech central bank that the economy continues to recover,” Radomir Jac, chief analyst at Generali PPF Asset Management AS, said in a note to clients. “Still, any sharp positive reaction of the Czech koruna to the data release would certainly not be welcomed by the Czech monetary policy makers after the currency’s gains seen in the previous week.”

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

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.