Czech Industrial Output Remains Far From Full Strength

Despite resilient industrial production data in April, the Czech economy faces significant headwinds from geopolitical risks and potential slowdowns. Consequently, ING expects the central bank to keep interest rates on hold despite pressure from strong credit and housing market growth.

Key Takeaways

• 1.Czech industrial output grew by 1.5% YoY in April, but capacity utilisation remains below long-term averages.
• 2.Rapid credit growth and a buoyant housing market provide a rationale for a rate hike, but ING maintains a base case of unchanged rates.
• 3.Geopolitical risks, specifically the Middle East conflict, are expected to weigh on industrial production and economic growth.

Table of Contents

• Czech industrial output remains far from full strength
• Production expands amid subdued capacity utilisation
• Manufacturing lags behind construction output
• The economy seems to have reserves
• Strong housing market and credit offer reasons for a hike
• New mortgages fly high
• M2 is cointegrated with CPI and picks up
• Real wages catch up with economic performance
• Real wages make up for preceding losses
• Reasons to keep rates unchanged
• Real rates set to remain in the restrictive area

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