BMI View: We hold a bullish view for the Czech consumer sector in 2017 on the back of strong wage growth, low unemployment and buoyant consumer confidence. The country will maintain its status as a regional outperformer in 2017, with domestic demand driving e conomic e xpansion.
We forecast that private consumption will constitute over half of real GDP growth in 2017, as the strengthening Czech Koruna, combined with weaker demand for manufacturing exports, accelerates the Czech Republic's push towards a more domestic-orientated growth model. Our Country Risk team forecast robust 3.5% expansion in private consumption in 2017, up from an estimated 3.0% in 2016. The Czech economy as a whole is expected to grow steadily over the remainder of our forecast period, registering 2.5% real GDP growth in 2017 and averaging 2.3% through to 2020.
|Consumer Spending Driving Economic Growth|
|Czech Republic - Real Private Consumption Growth, % y-o-y Vs GDP Per Capita, USD|
|f = BMI forecast. Source: Czech Statistical Office, BMI|
A tightening labour market underpins our optimistic view for the Czech consumer. Unemployment fell to 5% of the labour force in October 2016, which alongside Germany and the UK is among the lowest in the EU. The unemployment rate has been on an overall downward trajectory since early 2014 and this is increasingly translating into higher incomes. This is particularly the case in the country's large manufacturing sector, where job creation and wages have expanded strongly over the past three years, according to the Manufacturing Purchasing Managers' Index survey. Real wage growth averaged 3.9% in H116, lending support to our view that the rebound in private spending has further to run. While inflation is expected to tick upwards in 2017, nearing the central bank's target of 2.0%, record low interest rates will also continue to drive consumer spending.
|Tightening Labour Market Boosting Wages|
|Czech Republic - Unemployment Vs Real Wage Growth, % chg y-o-y|
|Source: Bloomberg, Czech Statistical Office|
High-frequency data further point towards a positive outlook for consumer-facing industries over the coming quarters. Consumer confidence remains high while retail sales (in constant prices) grew by 4.7% y-o-y in September 2016, slightly down on the two-year average of 5.4% but still well above previous lows recorded between 2012 and 2014. Czech incomes and household spending patterns are becoming increasingly characteristic of Western European markets, with retail sales set to benefit as consumers spend a higher proportion of household earnings on premium and durable goods.
|Consumer Confidence Remains Strong|
|Czech Republic - Consumer Confidence & Retail Sales (% y-o-y)|
|Source:Czech Statistical Office, Bloomberg|
The Czech Republic Retail Report has been researched at source and features BMI Research's independent assessment and forecasts for the retail sector. The report examines key drivers of retail sales growth and future prospects, including consumer spending and private sector investment.
BMI's Czech Republic Retail Report also examines the level of development and potential for growth of the retail sector, the commercial initiatives of major players, changing consumer demographics that influence demand and the regulatory environment. Key sub-sectors include mass grocery retail, autos, over-the-counter pharmaceuticals, computers and consumer electronics.
- Benchmark BMI's independent retail industry forecasts for Czech Republic to test other views - a key input for successful budgeting and strategic business planning in the Czech retail market.
- Target business opportunities and risks in Czech Republic through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
BMI Industry View
Summary of BMI’s key forecasts and industry analysis, plus a discussion of major industry developments and a snapshot of key short-term demand-driving macroeconomic movements.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the retail sector and within the broader political, economic and business environment.
BMI Industry Forecasts
There are four separate 5-year forecast modules in the retail reports. These are:
- Headline Retail Forecast: Total household spending (local currency and USDbn, % growth, % GDP, per capita, per household), spending by retail sector (food & non-alcoholic drink, alcoholic drink, clothing & footwear, housing & utilities, furnishings & home, health, transport, recreation, education, restaurants & hotels, personal care & insurance (local currency and USDbn, % growth, % GDP, % of total spending)
- Retail Sector Forecast: Breakdown of Food, Non Alcoholic Drink, Alcohol, Tobacco, Clothing, Footwear, Household Goods, Furnishings, Appliances, Glass and Tablewear, Household Textiles, Consumer Electronics, Garden Toys and Pets, Home and Garden tools, Personal Care, Personal Effects Spending (USDbn, % Growth)
- Household Income and Numbers Forecast: Number of Households (‘000, % growth); gross income per household and per capita; net income per household and per capita; tax and social contributions per capita; breakdown of household incomes – USD5000+, USD10,000+ USD50000+ (‘000, % of total); labour force, employment and unemployment (‘000, % change)
- Demographic Forecast: Total population; Babies 0-12 months; Young Children 0-4yrs; Children 5-9yrs; Young Teens and Older Children 10-14yrs; Older Teens 15-19yrs; Adults 21yrs +; Young Adults 21-29yrs; Middle Aged 40-64yrs (‘000, % growth, male, female); Urban Population (‘000, % population); Rural Population (‘000, % population).
BMI’s Retail Risk Reward Index
BMI’s Risk Reward Indices provide investors looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Provides a detailed country-specific analysis of the key trends and developments in the retail sector as a whole, as well as an assessment of the main drivers affecting the major retail segments including mass grocery retail, fashion, pharmacies, consumer electronics, home improvement and personal care. The market overview also considers the most effective store formats in a given country and the impact of these factors on the main international and domestic players’ development strategies.
This provides a brief overview of the key players in each subsection of the retail sector including MGR, Fashion, Home Improvement, Consumer Electronics, Pharmacies, and Department Store chains.
The Retail Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.