The industrial landscape of the Czech Republic encountered an unexpected stagnation in the initial month of the year, with production levels mirroring those of January 2023. According to the Czech Statistical Office (ČSÚ), monthly industrial production witnessed a 2.3 percent decline, with a notable slump in the automotive sector exerting significant influence.

In January 2024, industrial production remained stagnant compared to the previous year, reminiscent of levels observed in 2021. Radek Matějka, Director of the Department of Agricultural and Forestry Statistics, Industry, Construction, and Energy at ČSÚ, highlighted the growth in motor vehicle production juxtaposed with substantial declines in coal mining, metallurgy, foundry industry, and building materials production.

Machine and equipment production registered a significant 11 percent year-on-year decline. Conversely, smaller sectors such as paper, clothing, and miscellaneous manufacturing industries witnessed double-digit growth rates.

The value of new orders from industrial firms recorded a 2.7 percent year-on-year decline in January, accompanied by a reduction in industry employment, with average employee numbers declining by two percent compared to January 2023.

The primary catalyst behind the industry’s month-on-month downturn was the performance of the automotive sector. Jakub Seidler, Chief Economist of the Czech Banking Association, attributed the decline primarily to a nearly 12 percent month-on-month decrease in car production, following a robust 10 percent growth in December, which had propelled industrial production at the end of the previous year.

The stagnation in January comes as a disappointment, with analysts initially anticipating a two percent year-on-year growth. Tomáš Volf, an analyst at Citfin, underscored persistent challenges, citing subdued domestic and foreign demand despite favorable factors such as low unemployment and currency depreciation. Despite this setback, analysts remain cautiously optimistic, awaiting indicators of renewed momentum in subsequent months amidst evolving market dynamics.

Article by Prague Forum