Inflation and covid take people’s faith in the future. According to them, the year 2022 will be worse

Confidence in the Czech economy fell by 0.1 point month-on-month to 95.2 in November. It has been declining for five months in a row. The decline is mainly due to a drop in consumer confidence, while entrepreneurs’ outlook for the economy has improved. This follows from the results of a survey published by the Czech Statistical Office (CSO) on Wednesday. Compared to last November, on the other hand, confidence grew, both overall and among individual groups of consumers and entrepreneurs.

“In summary, the published November confidence indicator indicates that the process of a strong recovery of the domestic economy will be interrupted at the end of this year. The development on the supply side of the economy and the willingness of households to purchase goods and services will decide whether this interruption will be only temporary or will spill over to part of next year, “said Miroslav Novák, an analyst at Akcenta.

Entrepreneurs’ confidence in the economy increased by 1.5 points to 96.2 in November compared to October. On the other hand, it decreased significantly among consumers, by 8.1 points to 90.4. “The deterioration of the epidemic situation and the rapidly rising prices of energy and other commodities have undoubtedly resulted in a sharp deterioration in consumer sentiment. Compared to last month, people are much more concerned about rising unemployment and, in particular, the worsening of their own financial situation. They also assume that the sharp rise in prices will force them to make savings, “said Anastasija Nejasova from the CZSO’s Business Cycle Surveys Department.

According to the CZSO, the share of consumers expecting a worsening of the overall economic situation in the next 12 months increased significantly, while at the same time the share of people expecting an improvement in their own financial situation decreased significantly again. “The number of respondents worried about further price increases rose again in November, and is thus the highest in the history of the survey,” the CZSO said. Consumers’ fears of rising unemployment have also increased.

Although business confidence, as opposed to consumers, has grown overall, business opinions vary across sectors. The growth of confidence in the entire business sector is driven mainly by industry and construction. In industry, business confidence in the Czech economy rose by 4.6 points month-on-month to 93.2 and in construction by 2.4 points to 114. On the other hand, confidence in trade and selected service sectors fell. Among traders, the confidence indicator decreased by 1.2 points to 104.7 and in services by 1.3 points to 96.3.

“In all sectors, however, there is great uncertainty about future developments, which is also accompanied by expectations of rising prices of products, goods and services for a record number of entrepreneurs,” said Jiří Obst, head of the CZSO business cycle research department.

According to the chief economist of the Czech Banking Association, Jakub Seidler, the common factor in the November survey is the expectation of higher inflation. “Households are most worried about this in the history of the time series, and at the same time entrepreneurs are increasingly expecting their sales prices to rise,” he said.

“Especially due to the historically highest fear of inflation, consumer confidence in the economy fell relatively dramatically between October and November this year. While in October this confidence reached 98.5 percent of the long-term average from 2003 to 2020, in November it was only 90.4 percent, “comments economist Lukáš Kovanda on the results of the survey.

Jan Hadrava, Director of Strategic Consulting at PwC Czech Republic, believes that it is only a matter of time before data for entrepreneurs and consumers begin to converge again. “At first, therefore, business optimism and with it the overall indicator will probably decrease,” he said.

Year-on-year, confidence rose by a total of 12.6 points in November. Consumer confidence in the economy increased by seven points and among entrepreneurs by 13.8 points.

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