There are no encouraging data in last release. Industrial output decreased as well as volume of new orders and employment started to decline. The Czech industrial sector suffers from both worsening situation abroad and sluggish domestic demand. In July, production fell in 17 of 24 manufacturing sectors. Most importantly, output of steel mills significantly dropped (-8.7% yoy) and assembly of IT equipment and electronics decreased even more (- 12.8% yoy).
Situation in the automotive industry slightly improved (+4.2% yoy), however, its positive contribution was not sufficient to outweigh negative factors described above.
Declining demand forces firms to seek cost cuts. Thus, employment started to decline (-0.3% yoy) and wage growth decelerated (1.9% yoy). So, we can expect the negative loop from production statistics to domestic demand and back to become even stronger. New factory orders dropped by 2.9% in July. Foreign orders incrementally increased while domestic orders deeply declined. In 2012, industrial output is likely to stagnate.
Actual (Jun): -2.2% yoy
Consensus: -2.0% yoy
Previous (May): -2.4% yoy