Even though industrial output deteriorated in May, it still manifests resilience, with leading indicators generally remaining robust. So far, there is limited evidence of any significant and sustained deterioration in industrial activity due to trade barriers. Although the decline in industrial output in May was broad-based, only the coming months will tell whether the tariffs are beginning to take a heavy toll on Czech industry. The foreign trade balance continues to demonstrate resilience. Although it narrowed in May, it continued to expand in seasonally adjusted terms, with exports falling less than imports. Construction recorded a significant increase in May, partially offsetting a weak April.

Even though industrial output deteriorated in May, it still manifests resilience, with leading indicators generally remaining robust. So far, there is limited evidence of any significant and sustained deterioration in industrial activity due to trade barriers. Although the decline in industrial output in May was broad-based, only the coming months will tell whether the tariffs are beginning to take a heavy toll on Czech industry. The foreign trade balance continues to demonstrate resilience. Although it narrowed in May, it continued to expand in seasonally adjusted terms, with exports falling less than imports. Construction recorded a significant increase in May, partially offsetting a weak April.

Industrial production fell significantly in May, down 1.6% vs April. The mom decline in May interrupted the steady increase in industrial production. It had grown at a solid pace since the start of the year – apart from January – boosted by the effect of the US frontloading. Industrial production was down 0.9% yoy (NSA) in May, while the market consensus had expected an increase of 0.7%. Our estimate was for a more modest increase of 0.4%. When adjusted for the difference in working days, industrial production was up 2.2% in May.

From this perspective (WDA adjusted), industry managed to produce more than last year throughout this year, apart from January. The sharp decline in industrial output in May occurred even though the leading indicators of current production (PMI and CZSO business survey) remained at elevated levels. Furthermore, these indicators do not point to a weakening in June, but rather an increase in output.

Manufacturing output fell by 1.5% mom in May, with the decline relatively broad-based. The slowdown in May was also owing to lower car production (-3.1% mom), as already indicated by the AutoSAP data. Significant contributions to the decline also came from drops in machinery & equipment (-6% mom), computer & electronic equipment (-5%) and electrical equipment manufacturing (-1.9%). On the other hand, this was partially offset by higher production of other transport equipment (+23.2%).

In terms of value-added exports (including both direct and indirect exports), Czech exports to the US are concentrated in the automotive, fabricated metals, machinery & equipment and plastics & rubber manufacturing industries. Apart from machinery, where production has been falling for two months in a row, we have not yet observed a sharp decline in these sectors. Despite the US tariffs, there is still little evidence of a significant and sustained decline in industrial activity. Moreover, this is not yet reflected in the leading industry indicators. However, the situation may deteriorate later in the coming months. This would also accordingly shift our expectations for a significant slowdown in the Czech economy, which we foresee for this year, although in our latest April forecast, we looked for a mere stagnation in 2Q25.

The value of new industrial orders fell by 3.9% mom in May but was up 5.0% yoy. Furthermore, the mom decline followed a strong increase in April, which was attributable to high growth in orders in the automotive industry. Overall, the decline in industrial orders in May only partially offset the April increase.

Foreign trade balance continued to expand in seasonally adjusted terms.

Foreign trade ended May with a surplus of CZK13.3bn (compared to CZK23.2bn in April). After seasonal adjustment, the positive balance amounted to CZK19.9bn, constituting an increase in comparison to April. In total, foreign trade balance boasted an accumuluated surplus of CZK116bn ytd in May, which is, however, CZK8bn lower than in the same period last year. After seasonal adjustment, exports and imports were down by 0.2% and 1.0% mom in May, respectively.

The decline in the share of exports to Germany, which had increased significantly in 1Q25, continued. It is also likely declining due to the fading effect of US frontloading efforts. Despite US tariffs, Czech exports to the US remained up in yoy terms, while their share in total exports remained at around 3%, indicating that demand from the US for Czech exports is surprisingly not yet showing major decline due to higher import costs.

May construction output partially offset April disappointment.

After a significant decline in April, May was marked by solid growth momentum in construction. It seems that the figures were influenced by the timing of Easter this year, which had a negative impact on April data. This resulted in a significant mom decline of 4.8% (after seasonal adjustment), while May saw an increase of 2.3%. However, cumulatively, construction output is still half a percent lower than at the beginning of the year.

This year, building construction is doing particularly well, while civil engineering is lagging. In the civil engineering segment, which mainly includes large infrastructure projects usually financed from public funds, a mom decline (of 1.2%) was recorded in May after seasonal adjustment. Cumulatively, since the beginning of the year, the decline was as much as 2.6%. Building construction grew by 4.3% mom in May, following a 4.3% decline in the previous month. Cumulatively, it is up by almost one percent since the beginning of the year.

Compared to last year, construction output showed double-digit growth of 11.6%. In April, it was only +1.9%. The extremely low statistical base played a role here, influenced by the Easter effect and its divergent timing from last year. In terms of structure, building construction was up 10.8% yoy, while civil engineering was up 13.1%.

The indicative value of newly issued building permits was disappointingly low in May. This is traditionally a very volatile indicator, with a yoy decline of almost 40% recorded in May; the average yoy decline for the first five months was -21.3%.

Construction is closely linked to investment activity. In light of global economic uncertainty, particularly linked to trade wars, investment activity remains subdued. Restrictive monetary conditions also play a role, particularly in industry. Currently, relatively higher interest rates are compounded by a strong koruna. Nevertheless, after two years of decline in total real industrial production, we expect a slight increase for this year. Our forecast at the end of April was looking for growth of around 2%.

Residential housing statistics remain less than encouraging. The number of completed single-family dwellings was down 31.4% yoy in May, while the number of apartments was down 6.1%. In terms of future housing supply, there are no signs of a significant improvement yet – the number of new constructions starts was down 5.2%, with a significant decline of 18.7% in apartment buildings.

Employment continues to decline in the sector. In May, it was down 0.7% yoy. The average gross monthly wage was 5.4% higher than in May last year.

Kofola is ex-dividend today, Thursday, July 3, 2025. At the general meeting, shareholders approved a payout of CZK21 per share. However, the dividend payment will be reduced by an advanced dividend of CZK7.50, which was distributed in October 2024. The difference between the two, i.e. CZK13.50 per share, will be paid out.

The total dividend corresponds to an almost 90% payout of the previous year's adjusted net profit. The dividend of CZK13.50 offers a gross yield of 2.5% (the total dividend of CZK21 corresponds to a yield of 3.9%).

The record date is July 4, 2025. With standard settlement (T+2), today is the first day that shareholders no longer have the right to receive the CZK 13.50 dividend. The share price usually falls by the amount of the dividend on the ex-dividend date.

Payments will start on August 11, 2025.

Kofola is ex-dividend today, Thursday, July 3, 2025. At the general meeting, shareholders approved a payout of CZK21 per share. However, the dividend payment will be reduced by an advanced dividend of CZK7.50, which was distributed in October 2024. The difference between the two, i.e. CZK13.50 per share, will be paid out.

The total dividend corresponds to an almost 90% payout of the previous year's adjusted net profit. The dividend of CZK13.50 offers a gross yield of 2.5% (the total dividend of CZK21 corresponds to a yield of 3.9%).

The record date is July 4, 2025. With standard settlement (T+2), today is the first day that shareholders no longer have the right to receive the CZK 13.50 dividend. The share price usually falls by the amount of the dividend on the ex-dividend date.

Payments will start on August 11, 2025.