Analysts: Industrial production growth no reason for optimism

Prague, Sept 6 (CTK) - Results of the Czech industry are a pleasant surprise amid the flood of bad news coming from the Czech economy in recent weeks, but there is no reason for excessive optimism as the figures were helped considerably by seasonal and calendar influences, analysts told CTK in a poll.

Industrial production in the Czech Republic grew by 4.2 percent year-on-year in July after falling by 2.7 percent in June, the Czech Statistical Office (CSU) said yesterday.

"The reasons (behind the growth) are several extraordinary factors," UniCredit Bank analyst Patrik Rozumbersky said.

This year's July was one working day longer than July 2011. The growth of working day adjusted industrial production was 2.5 percentage points slower than unadjusted production, according to Rozumbersky.

Figures in some segments were higher owing to a different distribution of company holidays, which will probably negatively influence production in the following months.

The robust growth of new orders was caused by a low comparative base from July 2011. "As a result, we do not expect that the favourable figures from the industry will repeat in the months to come," Rozumbersky said.

The industrial data give no reason for excessive optimism as leading indicators from the industry do not offer very optimistic outlooks, Marketa Sichtarova of company Next Finance said.

Germany, which is the Czech Republic's biggest export market, is getting deeper and deeper into economic problems, Sichtarova said.

Contagion of the debt and economic crisis is slowly spreading from the south to the north, which will have a negative impact on the industry in a longer term, and European economies will continue to be weak.

"We cannot expect that the economy of the euro zone will recover from recession and demand for the Czech industry will increase markedly," Sichtarova added.

The statistics for July create mixed emotions, Jan Linhart, partner at company KPMG CR, said.

The fact that industrial production grew moderately in July as well as in the first seven months of this year is a pleasant discovery, Linhart said.

"On the other hand, the pace of this growth is far from levels we would like to see," he said.

The Czech economy is still driven by the car industry, although the growth pace of the segment has slowed down to only 1 percent. But the value of new orders suggests that the sector should continue to increase.

The continuing fall of the segments of electronics and basic metals production is not a piece of good news, Linhart said.

Patria Finance analyst Tomas Vlk said industrial data for July send positive signals.

Among them is above all the value of new orders and the sign that companies have successfully began to focus more on eastern markets that have markedly higher growth potential than the West, Vlk said.

Raiffeisenbank Michal Brozka said the full-year result of the industry is still likely to be negative in 2012 despite the good beginning of the second half of the year.