Conditions in Czech industry deteriorated further

Conditions in the Czech manufacturing industry deteriorated significantly again in December, although the decline was smaller than in previous months. The Purchasing Managers’ Index (PMI) reached 42.6, compared to 41.6 in November, S&P Global reported. The 50-point level in the index is the leading edge between growth and decline.

While the condition deterioration is milder than in November, it indicates a substantial decline in production and new orders amid weakening customer demand. Domestic and foreign market conditions are deteriorating due to the impact of high energy prices, S&P Global said.

“Demand conditions remained weak, and rising energy prices and inflation hit operations. Customers continued to cut back on spending, and new orders declined significantly. The reduction in production requirements in December led to a reduction in employment, stock purchases, and finished goods. In some places, companies also tried to reduce spending by using existing inventories of inputs,” said Sian Jones, chief economist at S&P Global Market Intelligence.

She said inflation and subdued demand would continue to be reflected this year, with industrial production reporting 0.7 percent growth for the entire year.

The pace of the domestic industrial downturn was slow since September but is still one of the biggest since the global financial crisis in 2009. New orders fell faster than production.

The prices of industrial production inputs, especially energy and material costs, were rising. But firms did not entirely pass on rising costs to customers, with output inflation at its lowest since March 2021. Firms tried to cut costs and adjust prices to boost sales.

Manufacturers were also cutting headcount at the end of the year and making redundancies in the face of lower capacity pressures. Employment fell at its fastest pace since August 2020.