February saw Czech industrial production experience a year-on-year growth of 1.5 percent, according to the latest Czech Statistics Office report released on Monday. The growth was mainly the result of energy production. The automobile manufacturing sector experienced a decline, but improved compared to previous months.
Economists have been warning for several months that the days of high growth are over and that, while the Czech economy is expected to continue growing in 2019, the rate is likely to be lower.
Data from the Czech Statistics Office’s February report on the state of Czech industrial production show a 1.5 percent year-on-year growth rate, but Delloite Chief Economist David Marek says the black numbers divert attention from certain problems. “The major reason behind the slight increase in industrial production is the rise in electricity production. It is solely connected to this one industry. Looking at the manufacturing industries we cannot be so positive.”
Chemical production, one of the main pillars of Czech industry, experienced a year-on-year decline of 2 percent. Automobile manufacturing, which is especially closely tied to the health of the German economy, experienced a 0.8 percent year-on-year decline.
However, Viktor Zeisel, Komerční Banka’s Chief Economist, says there are reasons to be hopeful about the automobile manufacturing sector.
“Overall we are a bit surprised at how resilient the Czech economy is, given how things are in Germany. Our neighbour is experiencing a recession for probably the fourth quarter in a row. Despite that, Czech industry is growing steadily in year-on-year figures. That is something that struck us. “Despite lower year-on-year figures in the automobile manufacturing sector, they were much better compared to what we saw in December and January.”
Some economists, including Mr. Zeisel believe the German economy will pick up again in the second half of 2019.
He says this expected rise will have a positive effect on the Czech economy and that of the wider Eurozone. Delloite’s David Marek spotted another, trend in the report.
“I would stress one interesting point and that is a decrease in employment in the manufacturing sector. We can see that the trend in the labour market is changing. Right now we may be at the bottom of the unemployment rate, but in sectors such as manufacturing the employment rate is actually decreasing.”
Currently, Czechs are still benefiting from very low unemployment rates, which sank to 3 percent in March after a slight seasonal rise during the turn of the year. Overall, economists still see the Czech economy continuing to grow in 2019.
David Marek predicts growth to lie at 2 percent of GDP while Viktor Zeisel is a little more optimistic, placing his projection at 2.5 percent. However, both warn of certain key threats that could hamper industry further.
First, it is the danger of a no-deal Brexit. Second, there is the possibility of trade wars between the USA, China and the EU, which would have a particularly strong effect on small, open economies such as the Czech Republic.