Weaker economic sentiment is also accompanied by a hawkish signal for the CNB

Economic sentiment deteriorated in September, although it remains around the long-term average. Its level is consistent with the short-term forecast of weaker year-over-year economic performance following a slowdown to 1.9% in the second quarter.

However, there is a clear downward trend in sentiment in the services sector due to weakening demand.

Conversely, trade sentiment improved in September, but confidence remains near recent lows. Nevertheless, consumer expectations regarding major purchases remained strong, though weaker than a year ago. They are thus consistent with solid growth in retail sales.

Improved consumer sentiment did not disrupt the trajectory of the weakening—albeit still strong—trend.

Construction sector slightly eased its sentiment due to weaker demand, though it is too early to assess the impact of higher mortgage rates..

Industrial sentiment likely weakened temporarily in September and thus remains within a stable but weak range this year. This likely reflects, at least temporarily, improved expectations despite bad news from the German auto industry.

For the Czech National Bank, alongside the slight weakening in confidence, somewhat more favorable employment expectations and higher price expectations will also be important, particularly in construction and services. The survey, which run until 15 September, has already been affected by oil prices exceeding USD 100 per barrel, a threshold crossed on 9 September, although diesel prices averaged CZK 47.5 per litre during the first half of September.

Economic sentiment deteriorated in September, although it remains around its long-term average

Its level remains in line with the short-term forecast of weaker year-over-year economic performance following a slowdown to 1.9% in the second quarter.

Consumer expectations regarding larger purchases remained strong, consistent with solid growth in retail sales.

A likely temporary decline in industrial sentiment due to improved expectation

Employment expectations remain at a neutral, slightly positive level, but registered unemployment continues to rise, a trend that is unlikely to be altered by improved business expectations (which are more likely to keep the survey-based unemployment rate stable)

Price expectations also surged, particularly in the retail sector ...

Rising price expectations in the construction industry are not good news for imputed rent

Elevated price expectations in the services sector do not bode well for the rest of the services sector in core consumer inflation