Industrial output fell in July compared with the previous month, thereby erasing most of the gains made in June. However, the July downturn in domestic industry is often influenced by holiday periods, so this indicator should be assessed in conjunction with the August data. The good news is that the volume of new orders increased steadily, including in the crucial automotive sector. 

Industrial output fell in July compared with the previous month, thereby erasing most of the gains made in June. However, the July downturn in domestic industry is often influenced by holiday periods, so this indicator should be assessed in conjunction with the August data. The good news is that the volume of new orders increased steadily, including in the crucial automotive sector. Domestic construction, on the other hand, got off to a good start in the second half of the year. This was driven by stronger growth in civil engineering, where public investment appears to be gradually increasing. The trend in building permissions was also encouraging, with new build permits growing at a high double-digit yoy rate. Foreign trade ended up in deficit in July. However, after seasonal adjustment, it showed a surplus, albeit lower than last year.

Industrial production in the Czech Republic fell by 1.1 mom in July, erasing much of the 1.4% increase seen in June. This was also disappointing compared with expectations, as the market consensus forecasted yoy growth of 0.5%, while output remained unchanged compared with July last year. However, this weak yoy growth was partly because July this year had one fewer working day than last year. After adjusting for this, yoy growth in industrial production reached a more robust 3.1%.

Within the manufacturing sector, output declined by 1.3% mm in July, with falls in most major sectors. Motor vehicle production declined by 2.8% mom, following a strong increase of 4.7% in June. This confirmed the high mom volatility in production volumes that has been observed throughout this year. Nevertheless, motor vehicle production in July was up by a robust 4.7% yoy (after adjusting for the different number of working days), confirming the recovery trend. Production also fell mom in July in related sectors such as electrical engineering and plastic product manufacturing. However, data for the summer months should be interpreted with caution due to the impact of widespread factory holidays, which are common in industrial operations. For this reason, it makes more sense to assess the July data in conjunction with the August figures only.

Overall, leading indicators point to a gradual improvement in the situation in European industry, including Czech industry. In recent months, industrial firms have particularly welcomed the growth in the number of new orders, especially those from abroad, as reflected in the available surveys. Today’s data confirms this, showing the nominal value of new orders in the Czech industry rose by 7.2% yoy in July. Orders from abroad increased by 15.7%, while domestic orders fell 6.6%.

In the automotive industry itself, growth in total orders was even stronger, reaching 12.5% yoy. The current recovery in pan-European industry is likely being driven by increased government spending in Germany, a global rise in investment in artificial intelligence and increased interest in energy-efficient technologies. However, the latter is linked to the renewed rise in energy prices, which remain a significant obstacle to the expansion of the European manufacturing sector. Furthermore, industry is currently experiencing problems with supply chains due to the ongoing conflict in the Middle East. These disruptions may also be exacerbated by low water levels in European rivers, which are limiting their navigability. Despite these challenges, however, the outlook for the industrial sector over the coming months is broadly optimistic.

Foreign trade was in deficit in July

The foreign trade balance showed a deficit of CZK 8.5 billion in July, which was slightly worse than our estimate of CZK -7.5 billion. This has now been the trend for the fourth consecutive July since 2022. However, this year’s result was CZK 5 billion lower yoy. After seasonal adjustment, the balance remained in surplus (CZK 7.7 billion). Compared with July last year, the surplus was almost ten billion crowns lower.

The overall foreign trade balance was positively influenced primarily by an improvement in the balance of trade in metal products (CZK +4.0 billion yoy), while a higher surplus in electricity (CZK +2.4 billion) and motor vehicles (CZK +1.7 billion) also contributed. The overall balance was negatively impacted primarily by an increase in the deficit in trade in computers, electronic and optical equipment (CZK 6.7 billion), crude oil and natural gas (CZK 3.7 billion), and electrical equipment (CZK 2.8 billion).

Exports rose by 3.9% and imports by 5.2% yoy. After seasonal adjustment mom, exports fell by 2.3% and imports by 3.1%. While last year's foreign trade surplus reached CZK 200 billion, we expect this year’s figure to be approximately half that amount. This lower surplus is caused by higher prices for imported mineral resources and a revival in capital-intensive domestic investment activity.

The first month of the summer holidays went well for construction

The start of the second half of this year was positive for domestic construction firms. According to our calculations, mom growth reached a respectable 2.0%, seasonally adjusted. Civil engineering did most of the heavy lifting, as we estimate it grew by 5.1%. Following a weak second quarter, it has thus gained momentum, which is likely linked to the gradual increase in public investment. According to our calculations, building construction improved by 0.4% mom.

On a yoy basis, the volume of Czech construction output increased 1.8% in real terms, which represents a slight slowdown compared to June’s figure of 2.0%. The driving force is clearly building construction, which is closely linked to residential construction. From this perspective, July follows a successful second quarter, which, in the national accounts, showed significant investment activity concentrated in the housing sector. However, civil engineering has fallen yoy for the second month in a row (by 3.4% in July).

The trend in building permits is encouraging, particularly for new-build projects, with a yoy growth rate of +20.9% in July. However, the low statistical base, which was affected last year by difficulties with the digital planning permission process, also plays a role. The trend in the number of newly started residential construction projects, particularly blocks of flats, is also promising, having risen by 21.2% compared with last July. However, the number of flats in detached houses was 3.1% lower yoy. A particularly positive figure for the residential property market came from the statistics on completed flats. In blocks of flats, 277.8% more were completed yoy.

The construction sector is performing well this year. In the first seven months of this year, real output was 3.6% higher than in the same period last year. Our full-year forecast stands at 2.6%. The sector is also boosting employment, with an increase of 2.1% yoy from January to July this year, while the average gross monthly wage in the construction sector has increased by 5.4% compared to a year ago.

CEZ announced its results for 2Q26, with net profit rising by +8% yoy, but falling short of market expectations. This was primarily due to the revaluation of trading instruments. Conversely, CEZ increased output at its nuclear and coal-fired power stations, while its Distribution division also performed better. CEZ also demonstrated a strong ability to generate free cash flow (WFT-free). The company's management has raised its FY targets for both EBITDA and net profit.  

CEZ announced its results for 2Q26, with net profit rising by +8% yoy, but falling short of market expectations. This was primarily due to the revaluation of trading instruments. Conversely, CEZ increased output at its nuclear and coal-fired power stations, while its Distribution division also performed better. CEZ also demonstrated a strong ability to generate free cash flow (WFT-free). The company's management has raised its FY targets for both EBITDA and net profit.  

Revenue for the second quarter totaled CZK74.7bn. This represents a slight yoy increase of +0.8%. However, EBITDA fell by 23% yoy to CZK23.8bn. This is 8.7% below the consensus estimate. As expected, the decline in EBITDA was negatively impacted by lower electricity prices, which affected the Generation segment. This sector also recorded a loss from Trading where positions were revalued. However, Mining and Distribution both saw yoy growth. Net profit, adjusted for exceptional items and non-controlling interests, increased by +8% yoy to CZK4.3bn. As anticipated, this growth was driven by a substantial decrease in the effective tax rate, due to the absence of a special tax (WFT).

The leverage ratio, measured as net debt to EBITDA, remained unchanged at 1.6x on a quarterly basis. However, both debt and cash increased due to the dividend payment in August.

Guidance for 2026: CEZ has once again increased its targets for this year. This is based on higher electricity prices, which are set to rise to EUR106–110MWh (previously EUR104–108MWh), higher output from nuclear power stations, and higher profits in the Distribution sector. According to the new forecast, EBITDA is expected to reach CZK109–114bn (+1.8% compared to the previous forecast of CZK107–112bn), while net profit is expected to reach CZK31–35bn (+3.1% compared to the previous forecast of CZK30–34bn).

According to our model, EBITDA should total CZK112.5bn, while net profit should total CZK37.4bn. The market is expecting CZK112.6bn and CZK36.8bn respectively.

The results reported for 1H26 represent 53% of CEZ’s revised full-year target for EBITDA and 54% for net profit (mid-range).

Compared with previous expectations, the estimated output from the gas-fired power station and the nuclear units has increased. Conversely, the outlook for renewable energy sources has been revised downwards.