Czechia - Business Confidence

Business cycle surveys carried out in the enterprise sphere are an important source of information in the countries the economy of which is based on market relations; they provide information on expected tendencies in the development of main areas of enterprise economy in the nearest future. They are important especially because they show the atmosphere in enterprise environment and provide information well in advance and thus serve to identification of turning points in economy and provide information also for such areas that are difficult to describe by quantity data. In that sense business cycle surveys are organized and used in countries with developed market economy already for decades.

Business cycle surveys - methodology

Since business cycle and consumer surveys are an important part of the information system used in the EU for monitoring of economic trends, they are included in priorities for macroeconomic statistics. Questions are harmonised with the requirements and recommendations of international institutions (European Commission DG ECFIN, OECD) and results of the surveys are part of materials of these institutions and are used for international comparisons.

Quality surveys in industry, construction, trade, on investments, services and among consumers are carried out for already many years in all countries of the Euro-zone, in transition economies and other OECD countries. The intention of further improvement is to constantly enlarge the database of results of the European Commission DG ECFIN and OECD, to ensure harmonisation of variables, presentation and dissemination of the results, methodological transparency and international comparability and utilisation of the survey results for cyclic analysis of economic development and construction of leading indicators in the highest possible number of countries.

The questionnaire for business cycle surveys is very simple so that the management of an enterprise can fill it in fast and answers can be obtained immediately even as far as urgent and topical questions are concerned. The questionnaires contain questions regarding expected and running tendencies. Questions are put in the form of evaluation scales, mostly with three possible alternatives of answers such as improvement, constancy, worsening, and the like. Evaluation of the results is made as a summary of the questions in individual alternatives; a clear expression of tendencies is business cycle balance, which is the difference between the answers “improvement” and “worsening” expressed in percents. The higher the positive balance of answers the more optimistic is the evaluation of the answer obtained.

Even at harmonisation of questions in questionnaires recommended by the EC – DG ECFIN and OECD the system of business cycle surveys is open and it is possible to apply also questions on other topical ranges of problems and important topics, etc.

The results are presented both as a verbal analysis and in the form of tables, graphs and business cycle mirrors. They are both the summary and results at various levels and types of classification. Time series of the results are seasonally adjusted regularly each month and from the results simple and complex development indicators according to the methodology of the European Commission DG ECFIN are compiled.

Methodological explanatory notes

The composite confidence indicator (Economic Sentiment Indicator) is a weighted average of seasonally adjusted confidence indicators in industry, construction, trade, in selected services and of the consumer confidence indicator.

The business confidence indicator is a weighted average of seasonally adjusted confidence indicators in industry, construction, trade and in selected services.

The consumer confidence indicator is the average of four indicators (expected financial situation of consumers, expected total economic situation, expected total unemployment (with inverted sign) and savings expected in 12 months to come).

Since January 2006, new weighting system is being used for construction of composite confidence indicator and business confidence indicator: confidence indicator in industry has weight 40%, confidence indicator in construction and trade 5% each, confidence indicator in selected services 30% and consumer confidence indicator has 20% weight in composite confidence indicator. The time series are recalculated backwards to May 2002 (start of the business cycle survey in selected services). Additionally, since January 2006, the average of 2005 is a base of basic indices of confidence indicators; data are recalculated and comparable.

The branch confidence indicators are constructed as averages of seasonally adjusted weighted business cycle balances. The business cycle balance is the percentage difference between the responses “growth (+)” and “fall (-)”.

The confidence indicator for industry is the average of seasonally adjusted balances of three indicators (the assessment of total demand, assessment of stocks of final production (with inverted sign) and the expected development of production activity). The confidence indicator for construction is the average of two indicators (the assessment of total demand and the expected development of employment).

Data is subjected to revisions