Industrial production in the Czech Republic fell by 1.4% year-on-year last year, with the largest decline in the production of machinery and equipment.

According to the Czech Statistical Office, the largest contribution to the overall year-on-year decline in industrial production of 1.4% last year was made by the production of machinery and equipment, where production decreased by 10.2% year-on-year (the contribution to the decline in industry in total was -0.80 p.p.). The production of motor vehicles, trailers and semi-trailers also decreased (contribution -0.44 p.p., a decrease of 2.3%) and the production of basic metals, metallurgy and foundry (contribution -0.26 p.p., a decrease of 8.3%). Coal mining decreased by 12% year-on-year. On the other hand, the highest positive contributions were recorded in the sectors of food production (contribution +0.17 p.p., a growth of 3.5%) and other manufacturing (contribution +0.11 p.p., a growth of 5.3%).

All players will have to rationalize their processes
“We also see the same trend as the CZSO data shows in the total financial volume of demands for our products and services. Compared to 2023, we also see a decrease in the financial volume of offers with the same number. At the same time, the declining volume of industrial production places all players in the supply chain in a position to increase operational efficiency and rationalize their processes. Many of them are also concerned about the possible introduction of new tariffs by the administration of US President Donald Trump. From a logistics perspective, I therefore see the solution primarily in smart technologies and the effective use of existing capacities, which will help companies maintain competitiveness even in deteriorated conditions,” says Tomáš Horák, Sales Director of Stow ČR.

Taking into account the global context, Tomáš Horák warns of the possible consequences of the tough customs policy that Donald Trump is starting to operate with. He rhetorically refers to the legacy of Republican President William McKinley, during whose administration average import rates in the USA increased sharply at the turn of the 19th and 20th centuries. "However, the protectionism of that time mainly affected the local market. Today, the global economy is significantly more interconnected, so similar measures could quickly disrupt supply chains around the world and raise the prices of finished products for consumers on all continents," warns Tomáš Horák.

Production of paper and paper products increased
According to data from the Czech Statistical Office, the production of paper and paper products also increased (contribution +0.08 p.p., growth of 4.6%). Martin Hejl, CEO of Thimm, which is engaged in the production of packaging materials in the industrial sector, points out that the decline in production does not affect all segments. "Sales of cardboard and paperboard packaging increased by 8% year-on-year. This number is usually a good indicator of the past and future state of the Czech economy, because it all starts with packaging material. Without boxes, goods cannot reach the shelves of a retail chain,” says Martin Hejl.

According to him, the driving force behind the growth in cardboard packaging production was mainly retail and e-commerce: “Last year, many companies moved their production from abroad back to the Czech Republic, and at the same time, there was no pressure on Czech consumers from political parties, so they started shopping again. Migration from Ukraine to the Czech Republic also had a positive effect on the sector, which led to increased consumption in retail (food and packaging). Thanks to this, the retail and e-commerce sectors rose higher.”

According to Martin Hejl, how the industrial sector will fare this year is a question. “It may be indirectly affected by potential new tariffs from the Donald Trump administration, which are still the subject of debate. If this step were to take place, it would probably be reflected in a decrease in economic growth and a decrease in production in Europe, but on the contrary, the Czech Republic could benefit from this by moving production from Western countries to the Czech Republic, as we have already seen in the past year. In the e-commerce sector, Chinese marketplaces could focus more on the European market, which would be reflected in their growing market share at the expense of European e-commerce, including Czech, to which our packaging materials sector is also related,” Martin Hejl thinks.

Back to the CZSO data. In the first quarter, industrial production fell by 0.9% year-on-year. In the second quarter, the pace of decline accelerated further: compared to the second quarter of 2023, production fell by 2.2%. After stagnation, or rather, a black zero in the third quarter, industry returned to decline at the end of the year. In the fourth quarter of 2024, industrial production fell by 2.6% year-on-year. Compared to the previous quarter, it decreased by 0.9%. These results were most affected by the production of motor vehicles, where compared to the same quarter of 2023, production decreased by 6.5%, especially in the part of the sector focused on the production of parts and accessories. As in previous quarters, the decline in demand in the machinery and equipment sector continued.

December year-on-year decline in production

Industrial production in December 2024 was 1.6% higher month-on-month in real terms, but fell by 3.0% year-on-year. "The December year-on-year decline in industrial production was most affected by the production of motor vehicles. This was mainly due to the high comparison base from the previous year. The production of electrical equipment, especially automotive components, also fell," says Radek Matějka, Director of the Department of Statistics of Agriculture and Forestry, Industry, Construction and Energy of the Czech Statistical Office. The decline in the production of machinery and equipment continued. The food and beverage industry maintained moderate growth at the end of the year. In sectors that recorded higher year-on-year growth, the result was partly affected by fluctuations in production and extraordinary invoicing at the end of the year, such as in the sectors of repair and installation of machinery and equipment or production of other non-metallic mineral products.

The value of new orders at current prices in December 2024 in the monitored sectors was at the same level as in December 2023. New orders from abroad increased by 0.5% year-on-year, while domestic new orders decreased by 1.0%. Month-on-month, the value of new orders was lower by 0.2%. "The year-on-year decrease in the value of new orders was most affected by the production of motor vehicles and electrical equipment, similarly to the case of production. The value of new orders increased year-on-year mainly in the production of computers, electronic and optical instruments," adds Veronika Doležalová, Head of the Industrial Statistics Department of the Czech Statistical Office. Partial long-term contracts were concluded in the production of machinery and equipment.

The growth in sales was mainly contributed by the production of motor vehicles
Sales from industrial activities at current prices for the whole of 2024 increased by 0.9% year-on-year. Direct export sales of industrial enterprises increased by 1.6% at current prices. Domestic sales, which also include indirect exports via non-industrial enterprises, increased by 0.1% at current prices.

The largest contributors to growth were the manufacture of motor vehicles, trailers and semi-trailers (contribution +0.8 p.p., growth 3.2%), the manufacture of computers, electronic and optical instruments and equipment (contribution +0.5 p.p., growth 10.2%) and the manufacture of rubber and plastic products (contribution +0.2 p.p., growth 3.0%).

On the other hand, industrial sales fell the most in the manufacture of machinery and equipment (contribution -0.44 p.p., decrease by 6.3%), production of basic metals, metallurgy and foundry (contribution -0.43 p.p., decrease by 12.3%) and in mining and quarrying (contribution -0.2 p.p., decrease by 14.6%).

The value of new orders at current prices in 2024 in the monitored sectors increased by 2.8% year-on-year. New orders from abroad increased by 2.6%. Domestic new orders increased by 3.2%.

The largest contributors to the growth in the value of new orders were the manufacture of motor vehicles, trailers and semi-trailers (contribution +1.8 p.p., growth by 4.8%), manufacture of computers, electronic and optical instruments and equipment (contribution +0.8 p.p., growth by 9.5%) and manufacture of other transport equipment and equipment (contribution +0.5 p.p., growth by 24.3%). Negative contributions were recorded by the manufacture of machinery and equipment (contribution -0.4 p.p., decrease by 3.3%), manufacture of basic metals, metallurgical processing of metals; foundries (contribution -0.6 p.p., decrease by 11.5%) and manufacture of textiles (contribution -0.03 p.p., decrease by 1.8%).

The average registered number of employees in industry in the Czech Republic was 2.0% lower in 2024 than in the same period of the previous year, and their average gross monthly nominal wage increased by 6.7%.

Within the EU, production fell the most in Croatia in November
According to data published by Eurostat, in November 2024, industrial production in the EU27 fell by 1.7% year-on-year. The largest year-on-year declines were recorded in Croatia (by 6.6%) and Ireland (by 5.6%). German industry fell by 3.3%, while Czech industry output decreased by 2.7%. From a sectoral perspective, the largest decline in the EU27 was in the production of leather and related products (by 12.9%) and the highest growth was recorded in other manufacturing (by 7.8%).