Main Development Trends of Czech Economy in 2013 and the Perspective for (April 2014)

Transcription

1 Main Development Trends of Czech Economy in 2013 and the Perspective for 2014 (April 2014)

2 The Czech Industry Results in 2013 in the Context of the EU Market and the Perspective for 2014 The Development of Industry in 2013 Industrial production increased year-to-year by 0.5% in The result of industrial production was not, however, quite straightforward from the year-start, because the industry followed up a decline from Production achieved its bottom as early as in the first quarter of 2013, when its year-to-year decrease was 5.4%. The decline slightly lessened in the second quarter to 2.4%, and industrial production in the third and fourth quarters returned to growth by 3.9% and 6.1%, respectively. The total annual result reflected recovery in the Eurozone, in particular in Germany, and the improving situation on the European automobile market, which resulted in the growth of domestic production of cars and of related sectors. Industrial recovery was predicted not only by foreign leading indicators, but also by the CSO domestic development survey, which signalled from the mid-year an increase of production activities and strengthening of trust among businessmen. Industrial Production Index (annual changes in %) Source:Czech Statistical Office, March 2014, graf MIT, Department for Economics Analyses Production in the manufacturing industries in 2013 increased in 14 sectors (by 1.4%, measured by the Industrial Production Index IPI). The growing sectors accounted for 63.3% of the total industrial sales. Growth was forced mainly by foreign demand and it was recorded in particular in the sectors that realise their production on the EU market. As regards manufacturing industries, the highest increases were recorded in production of other transport equipment (by 9.1%), in production of pharmaceutical products and preparations (by 7.6%), in wood processing and production of wooden products (by 6.7%), in other manufacturing industries (by 6.1%), in production of metal structures and metal products (by 5.3%), in production of clothing (by 3.3%), in production of beverages (by 2.8%), in production of machinery (by 2.7%) and in production of transport equipment (by 2.5%). The other growing sectors recorded increased production up to two percent. 2

3 Nine manufacturing sectors recorded decreased production (those sectors accounted for 27.6% of total industrial production). The highest decrease was recorded in production of computers, electronic and optical products (by 8.7%), repairs and installations of machinery (by 8.4%), printing and copying of recorded media (by 7.5%) and coking and oil refining (by 6.6%). The other sectors recorded lower year-to-year decreases in production below five percent. Industrial production, direct export sales and new orders, including trends (organizations with 50 or more employees, year-on-year changes in %) Source: Czech Statistical Office, March 2014, graph MIT, Department for Economics Analyses According to the MIT calculations (using available Eurostat data), industrial production in 2013 decreased year-to-year in EU-28 countries by 0.5%, in the Eurozone by 0.8%. Economic recovery was reflected in the growth of production in the fourth quarter of 2013 (production in the EU increased by 1.6%, in the Eurozone by 1.3%). There are very close links between the development in the Czech Republic and Germany and in the Eurozone, which is evident on the graph below. 3

4 Industrial production in Czech Republic, Germany and Eurozone, including the trends (year-on-year changes in %) Source: Eurostat, Czech Statistical Office, March 2014, graph MIT, Department for Economics Analyses The started growth of industrial production in the Eurozone in mid-2013 was reflected by a growth trend also in the Czech Republic. The development in the Czech Republic in late 2012 was affected by the total number of working days lower by three days, which was demonstrated by a higher growth in the end of By the main industrial groupings, the growth of production in the second half of the year was reflected in the annual results in increased production for intermediate consumption (by 1.9%), production for long-term consumption (by 1.3%), production for investments (by 1.2%) and production for short-term consumption (by 0.4%). Decreased production was recorded only in the energy sector (by 3.9%). Higher investment activities of industrial companies appeared in the third and fourth quarters of As regards classification of manufacturing industries by technological intensity, the MEDIUM HIGH- TECH sector occupied the most important position; it accounted for over a half of sales (50.6%, increasing its share by 1 point). Its production increased year-to-year by 3.6%. The sector includes automobile, electrical engineering and chemical industries. Growing sales were recorded also in the LOW-TECH sector - by 2.6%; the sector s share slightly increased (by 0.2 point to 15.2%). This sector includes less significant industries, such as the food industry, clothing industry, leather industry, wood-processing industry. Production in the other sectors decreased. The sales in the MEDIUM LOW- TECH were slightly lower by 0.1%, and its more than one fourth share decreased (by 0.4 point to 25.8%). This sector includes the branches related to the automobile industry (production of rubber and plastic products), metallurgy, production of metal structures, coking and oil refining and production of other non-metal mineral products. A higher decrease of sales was recorded by the HIGH-TECH sector - by 6.7%, decreasing its share (by 0.7 point to 8.5%). The development in this sector was adversely affected by a decrease in crucial production of computers. 4

5 Development of manufacturing industry production by technological intensity of production (y-o-y change in %, share in %, difference in pct. points) CZ-NACE Revenues from industrial activity Share in revenues of manufacturing industry Share in revenues of manufacturing industry in 2012 in 2013 Difference Manufacturing industry total 1,5 100,0 100,0 0,0 HIGH-TECH -3,7 9,2 8,5-0,7 MEDIUM HIGH-TECH 3,6 49,6 50,6 1,0 MEDIUM LOW-TECH -0,1 26,2 25,8-0,4 LOW-TECH 2,6 15,0 15,2 0,2 Source: Czech Statistical Office, table by the Ministry of Industry and Trade, March 2014 The volume of total new orders in selected sectors was the indicator informing about further development of industries; in 2013 this volume increased by 4.8%. Crucial was the increase in foreign orders by 5.8%, which accounted for 70.8% of all orders. Foreign orders became the main driver of domestic growth due to recovery of production and of orders in the Eurozone (in particular in Germany in the second half of the year) and due to the strong mutual links between the economies. They increased in the third quarter by 16% and in the fourth quarter by 18.2%. The highest increase of those orders in selected sectors was recorded in 2013 in production of other transport equipment (by 22.4%), in production of metal structures and metal products (by 13.3%), in production of cars (by 12.5%) and in production of pharmaceutical products and preparations (by 9.7%). Domestic orders increased by 2.5%; as regards selected sectors, most significantly in production of clothing (by 18.3%), in production of machinery (by 11.3%), in production of metal structures and metal products (by 11.2%) and in production of electrical appliances (by 8.2%). A moderate increase of sales (by 1.7%) and a decrease in employment (by 1%) resulted in higher productivity by 2.7%. The development of productivity exceeded the growth of real wages by 3.7 points and it was reflected in a decrease in the unit nominal and real labour cost. Productivity increased in most sectors of manufacturing industries (in 18 sectors); on the contrary, decreases were recorded in five sectors. 5

6 The Expected Development of Industry in 2014 The growth of industrial production, started up in the second half of 2013, will continue in Whether it is maintained will depend on further development in the Eurozone, in particular in Germany. The industrial development in late 2013 indicates recovery of Eurozone economies. That is why a continuing growth of foreign demand can be expected, which will be reflected in the growth of industry in the Czech Republic due to the strong mutual connections. Industry will grow more in the first half of 2014 because of the low baseline; its growth will slightly decelerate in the second half of the year. The foreign leading indicators in early 2014 (e.g. Purchasing Manager Index PMI) achieve aboveaverage values in the long term, which are backed up by accelerated growth of new orders. Business sentiment in Germany improved at the beginning of the year, confirming the expectations that the largest European economy would grow faster in The March results, however, slightly cooled down the optimism due to the situation in Ukraine. On the contrary, the CSO development survey of selected industrial companies indicates that both the trust and assessment of total demand improved. The development of the domestic automobile industry will also be important; its share in the Czech industrial sales is crucial (about a fourth of sales in the industry). The development in car-making companies will depend on the growth of sales, which grew dynamically in late A favourable development in the automobile industry will have a positive influence on supplier sectors and branches. A continuing growth of industrial production, which started in the second half of 2013, can be expected also in Considering the development to date, continual recovery of European economies and continuing favourable development of the automobile industry, 3% up to 5% growth of industrial production can be expected in The prediction is backed up also by the results achieved at the beginning of the year, when industrial production in January increased yearto-year by 5.5% and in February by 6.7%. 6

7 The Development of the Building Industry in 2013 and the Perspective for 2014 The building industry continued decreasing last year; the building industry has suffered from this trend for the past five year. A lack of domestic demand, both public and private, is still visible. Decreased production did not avoid at building construction and civil engineering, which had negative effects for employment. Building production in 2013 decreased year-to-year by 6.7% in real terms. If compared to the boom in 2008, culminating in the third quarter of 2008, building production decreased by 25.1%. Construction production index (% change compared with the same quarter of the previous year) Source: Czech Statistical Office, March 2014, graph MIT, Department for Economics Analyses Looking at building construction and civil engineering, production decreased in both sectors quite intensively. Production in building construction decreased year-to-year by 5.6% and civil engineering recorded a 9.3% decline. Neither building construction, nor civil engineering recorded positive yearto-year changes. Building construction achieved better results throughout the second half of the year. The year-to-year decrease in the third quarter was only 0.1% and in the fourth quarter 3.4%. Civil engineering recorded a year-to-year decrease by 2.6% in the last quarter, which was its highest decline in the last year. This result was better mainly due to the good conditions in December (warm weather and completion of invoices in the year-end). 7

8 Buildings and civil engineering works (% change compared with the same quarter of the previous year) Source: Czech Statistical Office, March 2014, graph MIT, Department for Economics Analyses The approximate numbers of employees in the building industry keep decreasing due to the decline in building production. The average recorded headcount in enterprises with 50+ employees decreased year-to-year by 8.1%. The average nominal wages of those employees decreased in a yearto-year comparison by 3.2%, achieving CZK 29,042. Real wages decreased year-to-year by 4.5%. Productivity in the building industry increased year-to-year by 1.5% last year. With wages being lower, the nominal labour cost decreased year-to-year by 4.6% and the real unit labour cost by 5.9%. The numbers of permitted constructions and their approximate values also keep decreasing for several years in a line. Last year the number of building permits decreased by 13.2% year-to-year to 84,864. Such a decline in building permits was recorded for the last time in The number of permits did not exceed the preceding-year values in any quarter in the last year. Long-term trend of number of permits, estimated value number CZK mil. Estimated value Permits Source: Czech Statistical Office, March 2014, graph MIT, Department for Economics Analyses 8

9 The approximate values of permitted constructions decreased year-to-year by 19.1% in The values of building adaptations decreased more during the whole year by 28.6% year-to-year, which was also due to the high baseline of the preceding year. The orientation values of new constructions decreased year-to-year by 12.3%. The values of new orders and the balance of orders in the year-end in enterprises with 50+ employees recorded a same year-to-year growth by 0.5% in The value of new orders amounted to CZK billion. In financial terms the value of orders decreased to 60% of the value in Last year orders in building construction decreased year-to-year by 13.8% to CZK 67.2 billion. Orders in civil engineering increased by 16.1% to CZK 82.7 billion. The low baseline in the preceding year was reflected there. The average value of new order was CZK 3.6 million; it decreased year-to-year by 1.8%. The balance of orders, which means a stock of work-in-progress, in the end of 2013 was CZK 141 billion; it increased year-to-year by 0.5%. Last year the balance of orders in the year-end achieved quite a positive result, which was due only to orders from abroad. In year-to-year comparison such orders increased by as much as 58.4%. Their share achieved almost 17% last year, growing from 10.7% in the preceding year. Foreign orders recorded a positive result, which can show this year. The highest share, however, belongs to public contracts; their share decreased below 50% last year, while five years ago the share of public contracts had been approx. 70%. While a decline of orders in the public sector only could be seen in the preceding years, also private orders joined this trend last year. Public contracts decreased year-to-year by 2.6% last year. The value of total orders had been decreasing for the past four years. Long-term trend of construction orders value (construction enterprises 50+ employees) Source: Czech Statistical Office, March 2014, graph MIT, Department for Economics Analyses 9

10 As regards housing projects, the numbers of both started and finished projects decreased last year. The number of started housing projects decreased year-to-year by 7.3%; construction of 22,108 apartments was started. Compared to 2008, when the boom culminated, the number of housing projects dropped to a half. The number of finished projects decreased year-to-year by 14.3% last year to 25,246 apartments. The numbers of finished projects decreased to the lowest level in the past ten years. The numbers of finished projects in 2013 were increasing by 3.4% only in the first quarter; for the remaining parts of the year the numbers kept decreasing. All kinds of constructions recorded lower numbers of finished projects. The numbers of finished apartments in single-family houses decreased year-toyear by 11.3% and the numbers of apartments in apartment houses by 14.7%. Housing construction (numbers) Source: Czech Statistical Office, March 2014, graph MIT, Department for Economics Analyses There will probably be no major change in the building industry this year. The development in the building industry can be influenced by priorities of the new Government. Government investments in the building industry, for example in the transport infrastructure, should increase. According to the Quarterly Analysis of the Czech Building Industry prepared by CEEC Research, managers of building companies expect a decrease in the sector by 0.6% this year. Growth in the building industry should appear next year by 1.8%. 10

11 The Development of Czech Foreign Trade in 2013 and the Perspective for 2014 In spite of the uneasy economic situation in Eurozone, the Czech foreign trade recorded good results in According to the cross-border statistics data, the trade surplus achieved a record value of CZK billion, which is more by CZK 45 billion in year-to-year comparison. However, the development from the year-start was not quite straightforward, as both exports and imports in the first half of the year, except for April results (and exports in May), decreased in year-to-year comparison. Recovery as predicted by the leading indicators did not fully appear before the second half of the year and then it was so strong that the year-to-year values of both exports and imports were brought up to positive figures. Exports and imports increased; however, their dynamics declined year-to-year. While, according to the cross-border statistics, exports and imports of goods in 2012 increased year-to-year by 6.7% and 3.0%, respectively, exports in 2013 increased year-to-year by 3.0% and imports by 1.8%. International trade of the Czech Republic in Source:Czech Statistical Office, March 2014, graf MIT, Department for Economics Analyses The foreign trade results in 2013 were affected particularly by the following factors: The improvement of both European and global economy, which was positively reflected in the development of foreign trade, in particular in the second half of the year. Persistent weak demand on the side of domestic households due to negative consumer expectations. A decrease in the first half of the year and a strong growth of industrial production in the second half-year, which was caused by recovery in Eurozone. In particular, increased demand for passenger cars brought industrial production in 2013 up to positive figures (the year-to-year growth was 0.5%). 11

12 The development of exchange rates; Czech koruna depreciated against the euro by 3.3% in average for the whole year 2013 to achieve the exchange rate EUR/CZK Against US dollar, Czech koruna appreciated by 0.1%. The average exchange rate was USD/CZK Prices of exports and imports; Export prices increased year-to-year in 2013 by 1.2%, while import prices decreased by 0.2%. The decrease of import prices was affected mainly by the development in mineral fuels; their import process decreased in average by 6%. On the contrary, as regards exports, the highest price increases were recorded by beverages and tobacco; their export prices increased by 9.2%. The terms of trade achieved for the while year a positive value of 1.4%. Import and Export Prices, Terms of Trade (%) Source:Czech Statistical Office, March 2014, graf MIT, Department for Economics Analyses Majority parts of Czech exports and imports were directed last year from/to the European Union. 81% of Czech exports were directed to EU28 countries, and the share of those countries in imports was 65.1%. The Czech Republic s dependence on EU28 declined year-to-year by 0.2 percentage points. In absolute terms, however, exports to EU countries increased by CZK 69 billion. On the contrary, the Czech Republic s dependence on imports from EU increased year-to-year by 0.8 percentage points. Implementation increased in absolute terms by CZK 51.9 billion. Exports to EU increased year-to-year by 2.8 percentage points and imports by 2.9%. The trade balance with EU countries closed with a surplus of CZK billion, which was by CZK 17.1 billion more rather than in Traditionally, the highest trade surplus was achieved by the Czech Republic in 2013 with Germany. While exports to this territory increased year-to-year by 2.5%, imports increased by 2.8%. The trade balance surplus was CZK billion, which is more by CZK 4.3 billion in year-to-year comparison. As regards the achieved surplus, Slovakia was the second most important country. Foreign trade with this country ended in a surplus of CZK billion, which was more by CZK 7.3 billion rather than in The five countries with which the Czech Republic recorded the highest surpluses also include Great Britain and Northern Ireland (CZK 99.7 billion), France (CZK 66.3 billion) and Austria (CZK 57.8 billion). 12

13 On the contrary, the foreign trade balances with non-eu countries ended in deficits. The highest deficit was recorded by the Czech Republic in trade with China, CZK billion. Compared to the last year, the deficit with this country declined by CZK 8.6 billion. The second highest deficit was recorded in the trade with South Korea (CZK 47.2 billion); compared to the last year the deficit declined by CZK 2.3 billion. High deficits were also recorded in trade with the Russian Federation (CZK 39.2 billion), Japan (CZK 34.8 billion) and Azerbaijan (CZK 23.6 billion). The teritorial structure of the international trade (2013) TURNOVER Annual EXPORTS Annual IMPORTS Annual BALANCE 2013 change 2013 change 2013 change Indicator CZK mil. Share v % in % CZK mil. Share v % in % CZK mil. Share v % in % CZK mil. CZK mil. Total ,0 102, ,0 103, ,0 101, Developed market economies ,0 102, ,5 103, ,6 102, EU countries ,5 102, ,0 102, ,1 102, EFTA countries ,1 99, ,1 99, ,1 99, Other developed market countries ,4 103, ,4 109, ,4 98, Developed countries ,7 101, ,1 104, ,4 99, European transition economies ,5 117, ,5 98, ,6 149, Commonwealth Independent States ,6 99, ,5 100, ,9 98, Other *) ,9 100, ,3 114, ,1 99, OECD countries ,1 102, ,2 102, ,2 101, *) China, North Korea, Cuba, Laos, Mongolia, Vietnam - Source: ČSÚ, March 2014, table MPO The international trade with chosen countries ( ) Turnover Exports Imports 1-12/ /2013 index 1-12/ /2013 index 1-12/ /2013 index 1-12/ /13 mil. CZK % mil. CZK % 13/12 mil. CZK % mil. CZK % 13/12 mil. CZK % mil. CZK % 13/12 mil. CZK mil. CZK Germany , ,8 102, , ,9 102, , ,4 102, Slovakia , ,1 100, , ,0 101, , ,2 98, Poland , ,7 103, , ,9 100, , ,1 106, China , ,2 100, , ,3 114, , ,6 98, Russia , ,8 99, , ,1 98, , ,0 100, France , ,6 102, , ,2 100, , ,4 104, Austria , ,1 99, , ,8 101, , ,8 97, Italy , ,3 103, , ,0 103, , ,2 104, Great Britain , ,7 103, , ,7 103, , ,6 101, Netherlands , ,6 92, , ,4 89, , ,5 95, Hungary , ,3 110, , ,9 116, , ,8 103, USA , ,2 100, , ,7 98, , ,8 102, Belgium , ,1 105, , ,6 108, , ,9 101, Spain , ,0 108, , ,0 110, , ,0 105, Switzerland , ,9 99, , ,3 98, , ,0 101, Korea , ,5 97, , ,7 104, , ,8 96, Sweden , ,6 103, , ,6 101, , ,1 105, Japan , ,6 98, , ,2 122, , ,1 92, Ukraine , ,8 99, , ,3 96, , ,1 105, Rumunia , ,7 120, , ,9 113, , ,0 131, Turkey , ,7 119, , ,7 130, , ,9 103, Norway , ,0 99, , ,9 101, , ,4 97, Denmark , ,6 110, , ,3 111, , ,6 108, Azerbaian , ,6 86, , ,9 120, , ,7 83, Thailand , ,1 91, , ,5 97, , ,2 91, Source:Czech Statistical Office, March 2014, graf MIT, Department for Economics Analyses Balance 13

14 As regards the structure of commodities, the favourable development of foreign trade was due in particular to machinery and transport equipment. Their share in exports was 53.8%, which is only slightly less (by 0.4 percentage points) rather than in Machinery and transport equipment accounted for 40.8% of imports, which is less by 0.5 percentage points in year-to-year comparison. Exports of this commodity group increased by 2.4%, imports increased by 0.4%, and the trade balance ended in a surplus of CZK billion. The comodity structure of the international trade of the Czech Republic (2013) EXPORTS Annual IMPORTS Annual BALANCE 2013 change 2013 change Indicator CZK mil. Share in % in % CZK mil. Share in % in % CZK mil. CZK mil. Total ,0 103, ,0 101, of which: 0 Food and live animals ,6 106, ,1 105, Beverage and tabaco ,7 111, ,7 106, Crude materials ,7 98, ,8 98, Fuels and related products ,2 84, ,7 97, Animal and vegetable oils, fats and waxes ,3 94, ,2 116, Chemical and related products ,4 106, ,4 104, Manufactured goods classified chiefly by material ,4 103, ,9 102, Machinery and transport equipment ,8 102, ,8 100, Miscellaneous manufactured articles ,7 109, ,1 106, Not specified ,2 153, ,3 127, Source:Czech Statistical Office, March 2014, graf MIT, Department for Economics Analyses According to the change of ownership methodology (national concept * ), exports increased year-toyear by 2.0% and imports by 0.1%. The trade balance recorded in 2013 a surplus of CZK billion. The Expected Development of Foreign Trade in 2014 Good results in foreign trade can be expected also in The low baseline of the first six months of the last year and continuing recovery in and outside the Eurozone will play a significant and positive role in the next months of this year. Weaker Czech koruna will also be positive. Czech economy is in the stage of recovery; foreign trade considerably contributes to recovery of economic growth. The automobile industry with many related branches will be the main driver. The January and February foreign trade results, both in the national concept and in the methodology of cross-border statistics, achieve positive two-digit values, following up the dynamics of growing exports and imports from the end of the last year. After the first two months, the trade surplus in the national concept is CZK 27.7 billion, which is more by CZK 8.6 billion rather than in the last year, and according to the cross-border statistics, the January and February surplus is CZK 77.8 billion, which is more by CZK 14.7 billion in year-to-year comparison. * Results according to the national concept methodology are based on the change of ownership between residents and non-residents. Unlike data from the cross-border statistics, which record only flows of goods, often without any link to cash-flows, those results provide better information about export performance and efficiency of foreign trade. That is why, commencing from January results (published on 10 March 2014), the Czech Statistical Office prefers in its commentary the development and structure of the balance in the national concept. Tables with data in the national concept have already been published since

15 The values of certain leading indicators slightly declined in February; however, they remain on several-month maximums and achieve above-average values in the long-term, which promises continuation of the positive trend. The situation in the Czech industry is also positive; domestic companies expect moderate acceleration of the rate of production activities for the next three months and a moderate increase of the rate of employment in the manufacturing industry. 15