Despite production stoppages in the automotive sector and a significant fall in motor vehicle production, industrial output rose month-on-month in August. The situation was salvaged by the completion of a major rail vehicle manufacturing order, which ultimately led to growth in the sector. This offset a considerable decline in energy production. Overall, we remain cautiously positive about the future development of Czech industry. However, output in the coming months may be affected by supply chain issues or higher energy prices. Construction output struggled in August. This downward trend is primarily linked to civil engineering. This may be due to the effects of the government changeover or the exhaustion of certain EU funding sources. Higher oil prices and production stoppages in the automotive industry were reflected in August's foreign trade deficit.

Despite production stoppages in the automotive sector and a significant fall in motor vehicle production, industrial output rose month-on-month in August. The situation was salvaged by the completion of a major rail vehicle manufacturing order, which ultimately led to growth in the sector. This offset a considerable decline in energy production. Overall, we remain cautiously positive about the future development of Czech industry. However, output in the coming months may be affected by supply chain issues or higher energy prices. Construction output struggled in August. This downward trend is primarily linked to civil engineering. This may be due to the effects of the government changeover or the exhaustion of certain EU funding sources. Higher oil prices and production stoppages in the automotive industry were reflected in August's foreign trade deficit.

Despite plant-wide holidays in the automotive sector, industrial production was up by 0.3 % mom in August. Compared with the same month last year, domestic industrial production rose by 2.7% which was close to the market consensus estimate of 2.8%. We had anticipated a significant decline compared with July given the production stoppages in the automotive sector, which caused a 7.2% month-on-month fall in motor vehicle production in August. This was, however, more than offset by a surge of over 80 per cent in the ‘other transport equipment’ sector, linked to the completion of long-term rail vehicle manufacturing orders.

The manufacturing sector recorded a month-on-month increase of 1.1%. However, performance across individual sectors was mixed. In addition to the automotive industry, there were significant month-on-month declines in production of pharmaceutical products, base metals, rubber and plastic products, and electrical equipment. Conversely, this was offset by increased production of machinery and equipment, metal structures and metalwork, and computers and electronic equipment. Nevertheless, the month-on-month increase in manufacturing output in August was insufficient to offset the decline in July entirely. Furthermore, industrial statistics continue to confirm high month-on-month volatility. Despite extended, widespread shutdowns in the automotive sector during the summer holidays, the manufacturing industry increased production by 2.7% year-on-year. However, the resumption of production following the end of these shutdowns in September was reportedly hindered by supply chain issues affecting domestic car manufacturers, which could restrict growth recovery towards the end of the third quarter.

Growth in total industrial production in August was dampened by a month-on-month decline of almost 6% in the energy sector. This was likely due to lower utilisation of nuclear power sources. Therefore, the decline should be temporary, and we expect production to increase in September.

The value of new orders fell by 6.8% from July to August. This was driven by a decline in orders from the automotive industry. However, year-on-year, the total value was still 5.9% higher. The decline in new orders was foreshadowed to some extent by the Czech Statistical Office’s business survey, which also indicates a deterioration in demand for September. However, the summer months often introduce increased volatility to the statistics, and previous months indicated higher demand for industrial goods, which should support production in the coming months.

Industrial performance in August was mixed, being significantly influenced by a sharp rise in rail vehicle production. Potential problems in the supply chains of domestic car manufacturers could complicate the ramp-up of production in September. The deterioration in demand assessments and the fall in orders during July and August also represent further uncertainty. Other risks include a renewed rise in energy prices and limited navigability on European rivers, which complicates transport. Despite these factors, we believe that the recovery of the domestic industry will continue, although negative news from the sector may predominate in the coming months.

Foreign trade remained in deficit in August

The foreign trade balance showed a deficit of CZK 5.3 billion in August, which was CZK 5.6 billion worse than in the same month the previous year. The conflict in the Middle East negatively impacted the balance. The deficit in oil and natural gas widened by CZK 8.6 billion, while the deficit in coke and refined petroleum products increased by CZK 2.3 billion. Meanwhile, the surplus in motor vehicles narrowed by CZK 3.7 billion, likely due to the adverse impact of company-wide holidays in the automotive industry. Conversely, the trade surplus increased for other means of transport and equipment (by CZK 2.8 billion), metal products (by CZK 2.1 billion), and machinery and equipment (by CZK 2.0 billion), which had a positive effect.

Exports rose by 8.5 per cent year-on-year, while imports rose by 10.2%. After seasonal adjustment, exports fell by 3.3% and imports by 2.7% on a month-on-month basis.

While last year's foreign trade surplus reached CZK 200 billion, we expect this year's figure to be roughly half that amount. This lower surplus is expected to be driven by higher prices for imported mineral raw materials, as well as a recovery in domestic investment activity, which is import-intensive.

The construction sector is losing momentum once again

Czech construction output fell by 1.1% month-on-month in August. This followed a 2.0% increase in July, which appears to have been a temporary pause in the downward trend. With the exception of July, construction output has been falling steadily since April. This trend is also reflected in a significant deterioration in year-on-year growth. While construction output was still 1.8% higher in July when adjusted for the varying number of working days, by August it had fallen by 1.4%.

The downward trend is primarily linked to civil engineering. Output in this sector fell by 3.5 per cent month-on-month in August, and by 12.3% year-on-year. This sharp year-on-year decline was partly due to the high figure from August last year. Civil engineering is traditionally closely linked to trends in public investment. These may still be influenced by the consequences of a change of government or the expiry of certain EU funds.

Building construction, on the other hand, has been performing well recently. In this sector, output increased by 0.2% in August, marking the third consecutive monthly increase. Year-on-year output growth accelerated from 4.9% to 5.9%. However, here too the base effect played a part, albeit in the opposite direction to that seen in civil engineering.

The revival in property development is providing a boost to building construction. The total number of building permits issued in August was 5,684, which is a year-on-year increase of 1.4%. From a year-on-year perspective, this is not a staggering figure, particularly given that last year's building permit process was hindered by issues with digitisation. Nevertheless, the statistics on the floor area of newly authorised buildings are more encouraging, having increased by 20.2% year-on-year. The number of new housing starts also rose significantly, by 42.3% year-on-year. Overall, the building permit statistics have for some time been indicating a possible shift in the structure of the housing stock, with apartment blocks prioritised over traditional detached houses in terms of construction. This trend is apparently influenced by the relatively higher purchase price of detached houses, not least due to the high cost of land, which is already unaffordable for many households. By contrast, the number of flats completed in August was down by In contrast, the number of completed flats fell by 3% year-on-year in August.

Increased residential construction in the future may ease the pressure for further growth in property prices, a trend that will also be influenced by the renewed rise in mortgage interest rates. Another dampening factor could be the CNB's recently approved stricter conditions for granting mortgage loans for investment properties, or their possible more substantial taxation in the future, which is currently the subject of political debate. The trend of gradual moderation in the rapid growth of property prices should therefore continue.

CEZ is selling its 49% stake in the Slovak company JESS (Jadrová energetická spoločnosť Slovenska). The buyer is a Slovak state-owned company which currently holds the remaining 51% stake.

The purchase price has been set at EUR189m. This equates to around CZK4.6bn, or CZK8.6 per CEZ share. Settlement will take place in the coming days.

In its financial statements, CEZ has an asset held for sale amounting to CZK2,291m. We anticipate that the difference between these two figures will constitute an accounting profit. Upon publication of the quarterly results for 3Q26 / 9M26 on 12 November 2026, we also expect the FY projection to be revised to take into account all factors affecting the company’s financial performance.

This is positive news, as CEZ typically distributes the proceeds from asset divestments to its shareholders (see the sales in Romania and Bulgaria, for example).

CEZ is selling its 49% stake in the Slovak company JESS (Jadrová energetická spoločnosť Slovenska). The buyer is a Slovak state-owned company which currently holds the remaining 51% stake.

The purchase price has been set at EUR189m. This equates to around CZK4.6bn, or CZK8.6 per CEZ share. Settlement will take place in the coming days.

In its financial statements, CEZ has an asset held for sale amounting to CZK2,291m. We anticipate that the difference between these two figures will constitute an accounting profit. Upon publication of the quarterly results for 3Q26 / 9M26 on 12 November 2026, we also expect the FY projection to be revised to take into account all factors affecting the company’s financial performance.

This is positive news, as CEZ typically distributes the proceeds from asset divestments to its shareholders (see the sales in Romania and Bulgaria, for example).