Economic confidence fell in May, close to a three-year low, mainly due to a decline in confidence in industry and services. Household confidence increased slightly, but also remains close to mid-2016 levels.
Household confidence slightly improved, but remains weaker
The slight increase in household confidence in May is attributable to reduced concern about rising unemployment and also to higher intentions to save. However, household concerns about future economic developments did not change in May and remain elevated, leaving household confidence near mid-2016 levels.
Industrial confidence lowest since end of 2013
Business confidence decreased in May, mainly due to declining confidence in services and industry, while confidence in the other closely-watched sectors increased slightly. In industry, the decline was driven mainly by worse expectations for the next three months, while the assessment of the current situation worsened only slightly. Though the "expectation" sub-component was likely influenced by forthcoming summer month shutdowns, total industrial confidence dropped to the lowest level since September 2013.
Other business segments under pressure besides construction
The services sector, like construction, had maintained confidence levels this year close to historical highs. But uncertainty abroad has gradually spread to industry and retail trade-reaching levels last seen in 2014- and to services, where confidence hit a three-year low in May. As such, total business confidence declined to the lowest level since the end of 2015. Construction remains the only segment with confidence above its one-year average.
Author: Jakub Seidler, Chief Economist, ING Bank Czech Republic
Source, image: ING Bank Czech Republic
30th March 2020