Economic confidence fell noticeably in July, and it
for both households and businesses, falling to the level of the
of the year. In the case of businesses, the decline was mainly driven by industry and services,
which are the most heavily weighted, while in construction and retail, confidence
improved (Chart 1). The noticeable decline in industry follows June's growth
and the main reason is the traditionally volatile development of expected production
in the coming months. Less optimistic developments are signalled in particular by
automotive companies, which may also be related to the fact that some are facing problems
supply problems and have had to partially reduce their production. In the case of the industry
an increasing number of firms are pointing to insufficient demand as a barrier to growth,
on the other hand, staff shortages are among the lesser problems and are indicated in particular by
firms in the construction sector. For households, confidence fell for the third month in a row and
to the level at the beginning of the year (Chart 2), with the majority of households starting to
perceive their financial situation to be worse compared to last year, they also see it
worse for the year ahead. Today's figures thus suggest that the rapid growth in confidence
of household confidence at the beginning of the year was driven by over-optimism and households are still
the cost-of-living increases of the last two years. In the case of firms
the large volatility in the data continues, driven mainly by industry and expected production
and thus the industrial situation remains volatile
with significant uncertainty about the future.
Household confidence fell noticeably in June, the sharpest month-on-month decline since December last year. Details show that households have again begun to perceive their financial situation as worse than a year ago, and perceptions of the timing of major purchases have also deteriorated noticeably. A larger proportion of households are also beginning to worry about price rises, although this sub-indicator does not enter directly into the calculation of the household confidence indicator, suggesting that some households are still concerned about price rises (Chart 3).
Businesses:
For businesses, July brought mixed news. Confidence improved further in retail and construction, while it fell sharply in industry. Here, however, the indicator is traditionally volatile, especially the sub-indicator "expected development of production in the next 3 months". This pulled confidence in industry up in June and, conversely, noticeably down in May. The high significance of this sub-indicator is probably mainly driven by the car manufacturers, which are struggling with fluctuating production, not least because of partial shutdowns due to shortages of needed parts. The decline in the indicator should therefore be seen in the context of its volatility. In general, however, as confirmed by the hard industry figures, the industrial recovery this year is very weak. This is confirmed by the rising share of firms perceiving insufficient demand as a major barrier to growth (Chart 4). This share reached 44% in Q2 and is the highest in four years. Conversely, in the case of services, the perception of insufficient demand has slightly decreased and is below the average of the last 4 years (16.6% vs 23.5%), in construction the perception of insufficient demand has slightly increased but is only slightly above the average of the last 4 years, showing that the difficulty with demand is particularly evident in industry, while the other monitored segments including retail perceive the situation more positively.
