The industry is afraid of high prices and weak demand

The industry is afraid of high prices and weak demand
The industry is afraid of high prices and weak demand

The new major problem is high input prices (especially energy) and weakening demand, which apparently cannot well digest rapid price increases in many areas.

The situation in Czech industry is changing. The main problem of the last two years – broken production chains – is slowly receding into the background. But this does not mean that with better availability of semiconductors, better times will automatically flash. The new major problem is high input prices (especially energy) and weakening demand, which apparently cannot well digest rapid price increases in many areas. The August PMI showed that new orders fell in the industry for the sixth month in a row and at the fastest pace since May 2020 due to high prices (CZSO figures sound more optimistic, but are delayed by two months). According to the PMI survey, clients are more hesitant to make purchases across sectors, and some of them are even canceling divided projects. This is slowly starting to be reflected in the production, which continued to decline during the summer. This was already visible to a certain extent from the “hard” data from the CZSO for June, and we will see what other results for July will reveal this week. According to the June figures, the situation is especially bad for more energy-intensive sectors such as the chemical industry (-5.2% month-on-month and -2.3% year-on-year) or metal processors (-8.3% month-on-month and -10.5% year-on-year). And sectors dependent on larger investment projects are also doing poorly – for example engineering (-7.9% month-on-month and -7.4% year-on-year). On the other hand, vehicle manufacturers are slowly starting to benefit from the fact that tensions in subcontracting chains are easing and they are able to complete fragmented production (+2.3% month-on-month and 18.2% year-on-year). However, this does not mean that the entire automotive industry is fine. While the increase in production is due to the growth of cars in progress and new demand, overall registrations of new passenger cars remain relatively low across Europe (we are not far from the bottom in Western Europe). We also assume that new orders will also be weaker in this sector in the coming months. In addition, a number of more energy-intensive subcontractors of the automotive sector have difficulty coping well with the sharp increase in energy prices. This is evidenced, for example, by the difficulties of some plastics manufacturers connected to the automotive industry, for whom a sudden increase in energy prices is often liquidating – as evidenced, for example, by the fate of the plastics company PP&T (ttps://archiv.hn.cz/c7-67108520-mghrn-024f9bb79a0a432).

The article is in Czech

Tags: industry afraid high prices weak demand

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