Czech manufacturing supported by new orders and strong hiring
The Czech manufacturing sector is demonstrating resilience through strong new orders and hiring trends, positioning the economy for continued growth. Per the full note from ing-think, the Czech industrial PMI registered at 53.5 for September, indicating sustained expansion despite low pricing power coupled with rising input costs. Notably, employment levels surged, reflecting the fastest growth in nearly four and a half years, which supports higher production capacity amidst solid domestic and international demand. With no immediate high-impact events on the calendar for the Czech Republic, market focus may remain on energy prices and Eurozone conditions that could influence the CZK.
What the desk is arguing
The Czech manufacturing sector is showing notable strength as new orders and robust hiring trends drive growth. Per the full note from ing-think, the Czech industrial PMI remains in expansion territory with a September reading of 53.5, demonstrating resilience in the face of rising input costs and low pricing power.
A sharp increase in employment has been a key factor, with job creation growing at its fastest rate since April 2022. This surge supports production capacity, which is crucial given the simultaneous rise in new orders from both domestic and international customers.
Where it sits in our coverage
Our consensus target for the CZK/USD stands at 1.075, with a range from 1.04 to 1.12. Specific firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's current view aligns well with that of jpmorgan, placing it towards the upper bound of the observed range. The consensus reflects a broadly positive outlook for the Czech economy in light of the latest manufacturing data.
How other firms see it
Aligned firms such as jpmorgan reflect a constructive view on the CZK, driven by positive economic indicators from manufacturing. Conversely, firms like bofa offer a more cautious perspective, hedging against potential challenges from rising costs and external market pressures.
Indicators such as industrial PMIs and European fuel prices may intersect significantly with the Czech economic outlook, impacting the CZK in the broader European context.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Czech industrial PMI at 53.5 indicates solid expansion in manufacturing.
- 02Strong job growth highlights capacity to meet increasing demand.
- 03Ongoing challenges include low pricing power and rising input costs.
- 04No imminent high-impact events are expected to influence the CZK in the near term.
Market implications
Traders should watch for sustained performance of the CZK against the EUR and USD at current levels, especially if PMI data continues to support the positive thesis. A close eye should be kept on global energy prices, which may dictate production costs going forward.
Risks to this view
Any significant escalations in energy prices or disruptions in supply chains could undermine the positive manufacturing outlook, potentially reversing the current bullish sentiment. Additionally, if new order growth decelerates sharply, this could trigger a bearish reevaluation of the CZK.
Older quick take Quick take Published 11:20 Czech Republic Czech manufacturing supported by new orders and strong hiring The Czech industrial PMI remains firmly in expansionary territory, despite a soft correction. Strong hiring is good news for the economy, while low pricing power and rising input costs may put profit margins under pressure. Expensive fuel remains a persistent issue for Europe, and this doesn't appear likely to change anytime soon A sharp increase in employment proved a solid contributor to September's figures, with job creation rising at the fastest pace in almost four and a half years Czech firms benefit from both new and existing customers The Czech industrial PMI remained solidly in expansionary territory at 53.5 points in September, recording only a modest correction.
Production and new orders continued to rise, supported by healthy demand from both domestic and international customers. Higher production levels point to the sharpest employment gains since April 2022. Input purchasing gained momentum, while supplier performance deteriorated due to transport delays and supply shortages.
Confidence in output growth over the coming year remains strong. Industrial PMI firmly in growth zone Source: S&P Global, Macrobond "> Source: S&P Global, Macrobond Price pressures intensified at the beginning of the production cycle, reflecting higher energy and basic material prices. Still, output prices rose at only a mediocre pace, putting some pressure on profit margins.
A notable contributor to September’s positive aggregate result was a sharp rise in employment, supporting production capacity to meet solid demand. The pace of job creation was the fastest in almost four and a half years; this is good news for the Czech economy, as the unemployment rate has been creeping up since early 2025, in line with our view that the service sector's potential is becoming saturated. A further increase in new orders was driven by both new client acquisitions and interest from existing customers.
The unemployment rate gradually increases Source: CZSO, Labour Office, Macrobond "> Source: CZSO, Labour Office, Macrobond The reading confirms that Czech manufacturing stands on firm ground, as we've previously suggested. At the same time, delivery times have been extended, and limited vendor capacity has become more common as the Hormuz conflict has persisted. Reduced pricing power and pressure on profits have somewhat weakened business confidence.
Still, Czech firms' ability to acquire new customers may further outweigh those negative elements, and it remains to be seen which of the two forces will ultimately take the upper hand. Energy is the essence Looking ahead, one of the more painful factors limiting European performance is high fuel prices. Sure, the price of oil, the underlying commodity, is set on the global market.
Sources & References
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