Although the Czech industrial output continues to fall in seasonally adjusted terms (-3.3% y/y), we can see some bright spots on the horizon. Cycle-sensitive machinery sector has improved significantly and new orders in auto industry are further improving. Also our leading indicator for the Czech industry seems to have stabilised somewhat.
On the first sight, the Czech Flash (leading indicator for the Czech industry) is still ugly. At -75.3 points, the Flash stays at its lowest level since September 2009.
Notably foreign orders within the PMI, which are at their lowest level since July 2009, are particularly low. On the other hand, good news is that the pace of Flash deterioration has been slowing down. What may be even more important is that the Flash is no longer falling across all of its components. Industry’s expectations (according to the OECD) increased after having fallen for seven months, while the Ifo index and new orders in the automotive industry have also been gradually stabilising. Hence December’s figures may confirm a change for the better in the end. This would be in line with our bet on a positive reversal of the Czech economy during the first half of 2013.