Czech Republic, September 8, 2025
News Summary
Industrial production in the Czech Republic strengthened, driven by broad gains in motor vehicles, machinery, chemicals, pharmaceuticals and fabricated metals. New orders rose notably, with domestic demand especially strong, while construction output and the value of building permits jumped, signaling further activity ahead. Exports outpaced imports, narrowing the goods deficit, supported by vehicles and machinery. Employment in industry eased slightly while construction jobs ticked up; wage growth showed modest moderation. The defense sector is expanding and absorbing capacity from automotive shifts. Overall, the data point to a favorable near-term outlook for exporters and continued economic momentum.
Czech industrial output accelerates in July as broad manufacturing gains and construction lift the economy
Key takeaway: Industrial production in the Czech Republic strengthened in July, supported by wide gains across vehicle, machinery, chemical, pharmaceutical and metal product makers. New orders climbed and construction continued to grow strongly, giving a positive near-term outlook for exporters and overall economic momentum.
Top-line figures
Working-day adjusted industrial production rose by 1.8% year-on-year in July and by 0.8% month-on-month. On an unadjusted basis output was up 4.9% year-on-year, beating expectations. The value of new orders increased by 6.6% year-on-year, with domestic orders up 13.0% and orders from abroad up 2.9%. New orders also rose 2.9% month-on-month.
Which sectors led the improvement
Robust gains were recorded in motor vehicle manufacturing, machinery, chemicals and plastics, pharmaceuticals and fabricated metal products. These sectors form the backbone of Czech industry and its supply chain, and motor vehicle manufacturing was a main driver of the rise in new orders. Automotive output showed a punchy 15% annual increase in that segment, partly reflecting a low comparative base from a year earlier. Companies making other transport equipment also secured significant long-term contracts.
Construction and housing
Construction output rose sharply, by 10.1% year-on-year and 1.0% month-on-month in July. The indicative value of building permits issued jumped 37.9% year-on-year, signaling future activity. At the same time, however, the number of dwellings started fell 9.2% and completions were down 13.4% year-on-year in July. Analysts assess that housing demand across the country is not yet saturated despite continued residential price gains, so construction remains a strong engine of domestic growth and is described as still in its teenage years.
Employment, wages and mortgages
The average number of employees in industry fell by 1.9% year-on-year in July, while average monthly nominal wage growth in industry eased to 5.0%. In construction, employment edged up 0.6% year-on-year and average wage growth slowed to 3.8%. New mortgage lending reached a record high in the second quarter of 2025 (excluding the pandemic-era spike). This surge may reflect households rushing to lock in attractive rates ahead of potential policy tightening, and continued elevated demand for housing and borrowing to buy property.
Trade and exports
Preliminary foreign trade data for goods showed a deficit of CZK 1.7 billion in July, an improvement of CZK 5.5 billion compared with a year earlier. Exports grew by 4.7% year-on-year while imports rose by 3.1% year-on-year. The trade picture was helped by a larger surplus in motor vehicle exports and stronger surpluses in other transport equipment and machinery, underlining the role of manufacturing in external performance.
Outlook and interpretation
Solid growth in new orders, broad sector gains and a resilient construction sector point to a favorable short-term outlook for industrial activity and Czech exporters. The data suggest that overall industry is bottoming out and is now joining household consumption and construction as drivers of growth. The recent softening in annual wage dynamics is viewed as monthly volatility and does not change the general setup for robust wage growth over the medium term. Taken together, the economy appears to be moving forward on solid ground.
Longer-term context: industry, cars and defense
Over recent decades the country built a diversified industrial base and a highly productive automotive sector. Vehicle production reached a record of more than 1.4 million units in 2024, though production fell sharply in the first quarter of 2025. Causes include weaker Western demand, broader strains in the European auto industry, a slow shift to electric vehicles and external trade measures.
At the same time, the defense and arms sector has expanded strongly since 2022. Output at arms factories increased, covering modernized hardware, ammunition, drones and related systems, with a large share exported. The defense sector is creating additional demand for workers and capacity that can absorb some labor displaced in parts of automotive manufacturing, and certain manufacturers have signaled major increases in ammunition and missile-engine production and related hiring plans. Defense spending rose to around 2% of GDP in 2024 with plans to ramp up further in coming years.
Bottom line
July’s data present a broadly positive picture: manufacturing output is picking up with wide sector participation, new orders are rising, construction remains strong and trade is improving. Employment shifts and wage dynamics deserve monitoring, but the near-term balance of forces favors continued progress for the economy.
FAQ
What caused the July rise in industrial output?
The rise was driven by strong activity across core manufacturing sectors: motor vehicles, machinery, chemicals and plastics, pharmaceuticals and fabricated metal products. Motor vehicle manufacturing was a particularly important contributor to new orders and output gains.
Is the construction boom likely to continue?
Construction showed robust growth and a large increase in the value of building permits, suggesting more activity ahead. Lower starts and completions in July point to timing and supply factors, but demand remains elevated and housing demand is not yet seen as saturated.
How did trade perform in July?
Exports rose faster than imports in July, helping to narrow the goods trade deficit compared with a year earlier. Motor vehicles, other transport equipment and machinery were the main contributors to the improved trade balance.
Are jobs and wages improving?
Employment in industry edged lower year-on-year while construction employment ticked up. Wage growth moderated slightly but remains positive; analysts view month-to-month softness as volatility rather than a trend break in overall wage momentum.
What about the automotive sector and defense manufacturing?
Automotive output is large historically but has faced recent weakness. The defense industry has expanded since 2022 and is absorbing capacity and workers, boosting production of ammunition, vehicles and related systems and increasing exports.
Key figures at a glance (July)
| Indicator | Change | Notes |
|---|---|---|
| Industrial production (working-day adjusted) | +1.8% y/y | +0.8% m/m |
| Industrial output (unadjusted) | +4.9% y/y | Stronger than expected |
| New orders (value) | +6.6% y/y | Domestic +13.0%, Foreign +2.9% |
| Construction output | +10.1% y/y | +1.0% m/m |
| Building permits (value) | +37.9% y/y | Indicator of future construction |
| Dwellings started | -9.2% y/y | Timing and project pipelines matter |
| Dwellings completed | -13.4% y/y | Lagging indicator |
| Average employees in industry | -1.9% y/y | Labour shifts between sectors |
| Average wage growth in industry | 5.0% y/y | Monthly volatility noted |
| Foreign trade balance (goods) | Deficit CZK 1.7bn | Improved by CZK 5.5bn vs prior year |
| Exports | +4.7% y/y | Key driver of trade improvement |
| Imports | +3.1% y/y | Moderate growth |
Deeper Dive: News & Info About This Topic
Additional Resources
- ING Think: Czech industry joins the growth pack
- Wikipedia: Economy of the Czech Republic
- Encyclopaedia Britannica: Czech Republic — Economy
- Google Search: Czech Republic economy 2025
- MLex: USITC preliminarily says Indian, Czech freight rail couplers threatened industry
- Google Scholar: Czech freight rail couplers USITC
- Deutsche Welle: Are weapons — not cars — the future engine of the Czech economy?
- Encyclopaedia Britannica: Czech defense industry
- ASDNews: BAE rolls out newest combat vehicle for Czech army
- Google News: BAE combat vehicle Czech army
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