April industrial numbers show solid economic health
April's monthly figures open the way for stronger GDP growth in Q2 for now, after slowing to 0.2% q-o-q in Q1. The April industrial numbers are 1.8% above the first quarter average thanks to the April rebound. Despite a slight April decline, the construction sector is on an uptrend, thanks in part to strong housing starts, which rebounded from weaker building permits. Moreover, its sentiment does not suggest a change in trend. Foreign trade reached its lowest surplus below CZK4bn since the end of the energy crisis in 2022. However, this mainly reflects higher non-energy imports, while export activity also showed solid growth thanks to ICT. Thus, net exports are unlikely to drive GDP, similar to the first quarter when their weaker contribution was offset by stronger investment activity.
Industrial production rose by 1.4% month-on-month in April, including a 1.2% increase in manufacturing, which saw a rebound in car production, but also in non-car and energy-intensive industries, which eased slightly after the recovery in February and March. This was compounded by stronger numbers from the energy sector. This led to a month-on-month acceleration in growthIndustrial production rose 1.5% year-on-year in April, with manufacturing adding 1.7%. After a weaker first quarter, manufacturing returned to month-on-month growth in April, with a three-month annualized growth rate of 11.7%, suggesting an acceleration in industrial activity. Industrial sentiment deteriorated in May , but remained above the levels of previous quarters, suggesting stagnation rather than contraction in the short term. The main risk remains the resilience of external demand due to the war with Iran.
Construction continues to show the strongest momentum. Construction output grew by 7.9% year-on-year in April, with civil engineering adding 12.1%. Although construction output fell by 1.0% month-on-month, the three-month annualized growth rate was a very strong 22.1%, confirming the continued expansion of the sector. Moreover, construction is one of the segments with confidence above the long-term average and the April surveys showed further improvement.
Foreign trade in goods remains a mixed signal. Exports grew by 7.4% y-o-y in real terms and imports by 9.8% y-o-y, leading the trade balance to move into a deficit of CZK 10 billion y-o-y. Nevertheless, month-on-month data show a resumption of growth in both exports and imports, and quarterly dynamics suggest continued growth in foreign trade activity. However, the weaker balance confirms that domestic demand is currently growing faster and foreign trade is not adding much to GDP growth.
Retail sales did fall in April, but in an environment of still strong consumer demand, I attribute this more to a correction after an exceptionally strong March. April industrial wages slowed year-on-year, but their month-on-month momentum remains strong. Plans for major purchases have fallen from higher levels but are still consistent with solid growth (see chart 2 here: April's decline in retail sales does not change the outlook for consumption. But there are more risks in the second quarter). At the same time, services have maintained their decent pace of output growth.
The CBA's forecast of 0.4% qoq GDP growth in Q2 does not look overly optimistic in light of the April figures. I expect industrial production to grow by 0.2% m-o-m in May - boosted by energy, less so by manufacturing, which would accelerate its annual growth to 2.7% from 1.4% in April. Retail sales excluding could rebound by 0.4% m/m, which, thanks to a weaker base, could push its annual pace to 3.5% swda after 2.2% in April.
Industry gathers strength to return to the strong production volumes of the end of last year
Retail and services continue solid trend despite April correction
April economic activity marked by recovery in industry, correction in retail trade and construction
The industry leaned on the manufacturing and energy sectors in April
Energy-intensive industry could further benefit from a recovery in construction
The construction industry is growing thanks to the building segment...
... which goes year after year with increasing numbers of housing starts. Surprisingly given the weak building permit numbers
However, even building permits improve after a weak 2025. However, the entire permit, start and completion segment is about 10-20% below the five-year average
The foreign trade surplus narrowed thanks to stronger imports ...
... but not with energy... 
...which is reflected in a more negative deficit when cars and energy are excluded...
... which was not prevented by stronger exports in the ICT, electrical equipment and machinery segments. 
Industrial wages maintain strong momentum
The registered unemployment rate continues to deteriorate slightly towards 5% after seasonal adjustment, although the sample indicates stabilisation