Czech manufacturing sector contracts in June

Manufacturing

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Czech manufacturing activity deteriorated for the first time in almost two years in June, driven by a renewed contraction in output and a faster decline in new orders, survey data from S&P Global showed on Friday.

The Purchasing Managers' Index for the manufacturing sector fell to 49.0 in June from 52.3 in May. Any reading below 50 suggests contraction in the sector. The reading fell below 50 for the first time since August 2020.

Output showed a marked fall in June and the rate of contraction was the fastest since May 2020. This was due to lower new orders amid inflationary pressures and a drop in consumer confidence.

Client demand was also dampened by disruptions in supply chains in June, as customers prioritized essential goods in times of soaring costs.

Input price inflation remained historically elevated in June, led by hikes in supplier, material, fuel, energy, and transportation costs. Despite this, cost inflation was slowest in the current 16-month sequence started in March 2021.

The rate of charge inflation was also the softest in a year. At the same time, pressure on capacity decreased in June, with backlogs of work decreasing for the first time in 20 months.

Looking ahead, although firms remained optimistic, they expressed increased concern about the further impact of inflation on customer and investor spending. 

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