Consumer confidence in the Czech Republic surged unexpectedly in July, marking its strongest reading since September 2021, according to new figures from the Czech Statistical Office (CZSO). The indicator rose by 3.4 points to 104.1, exceeding market expectations and reflecting renewed optimism among households regarding the national economy and their personal financial prospects.
© Yasonya | Dreamstime
'Trust in the economy increased among consumers in July, with the share of those expecting a deterioration over the next year shrinking noticeably," the report stated. "The share of households expecting their financial situation to improve over the coming year picked up compared with June.'
Additionally, there was a drop in the number of respondents who reported they were not planning to make large purchases, further signalling an upturn in consumer sentiment.
While consumer confidence strengthened, overall business sentiment slipped slightly. Business confidence dropped by 1.2 points to 98.8, with declines recorded in industry (-1.0 points) and selected service sectors (-2.1 points). The construction sector held steady, while confidence in the trade sector rose by 2.6 points.
Chief Economist David Havrlant of ING Czech Republic described the weaker business figures as likely "a transitory issue" and reaffirmed the bank's view that 'Czech industry [is] bottoming out.' He added, "Domestic manufacturing is expected to receive a boost from the gradual rebound in Germany, which appears to have been underway since the start of this year."
The prospect of simultaneous recoveries in both Germany and the Czech Republic could further strengthen the outlook. 'Such a development would ultimately imply a pro-inflationary environment,' Havrlant said, pointing to rising capacity utilisation and potential strains on labour and capital resources. Current capacity utilisation in Czech industry reached 83.2% in Q2 2025, with some room left before hitting the 90% peak seen in 2008.
Looking ahead, ING forecasts Czech economic growth of 2.3% in 2025 and 2.5% in 2026, driven by robust wage increases and external momentum. However, Havrlant cautioned that a tightening labour market could push inflation higher: 'The tight labour market could present even more potent upward risks to consumer inflation, and Czech policymakers may struggle to keep inflation within the tolerance band.'
As a result, 'we see no more rate reductions as the base case scenario for the CNB,' with the potential for a 'tighter monetary policy setup sooner than generally expected.'
More information:
ING
www.think.ing.com
