* Industrial production rises for 10th straight month
* Latest data point to revival in domestic, foreign demand
* Companies' confidence in recovery growing
* New investments in pipeline, but jobs to come later
* Markets count on central bank's FX policy into 2015
By Jason Hovet
PRAGUE, June 8 Czech companies are growing more
confident and slowly starting to look at new investment as a
succession of strong data shows the beaten-down economy is
beginning to spring back.
A year after the central European country climbed out of a
record-long recession, Czech consumers are regaining confidence
and some firms are planning to increase production and take on
State agency CzechInvest said this week it had already
received 100 applications for investment aid this year, the most
since 2008 and more than the 2013 total of 98 applicants.
Manufacturing is now growing, spurred by double-digit growth
in exports to Germany and other western markets. Consumers also
have less to worry about as a new centre-left cabinet reverses
some of the fiscal restrictions of the previous administration.
That is feeding into a new optimism for the economy, says
Czech Industry Confederation Vice-President Radek Spicar,
although many will likely err on the side of caution for now.
"(Companies) will be investing more. Their investment
appetite is increasing, that is for sure," he said.
"They see clear signs of improvement, they feel the
situation is getting better, but ... companies are still very
careful because what they've been through in the last few years
has taught them a lesson."
Slumping demand at the height of the euro zone's debt crisis
along with budget cuts and higher taxes under a former
centre-right government had helped tilt the Czech economy into
an 18-month recession that only ended last year.
But the economy - and mainly exporters - got a reviving jolt
from the central bank's currency interventions last November to
fight the risk of deflation. The move has weakened the crown by
more than 6 percent, making Czech-made cars, auto parts,
electronics and other goods more attractive.
WORKING LONGER SHIFTS
Otto Danek, who runs small electric motor maker ATAS
Elektromotory Nachod and is vice-chairman of the Exporters'
Association, said his sales are up 9 percent so far this year.
He plans more hiring but is in no rush, illustrating a trend
that analysts say show job growth will only come later.
"We should have 50-60 new people, but we have hired only 20
so far. We would rather do extended shifts and weekends (to meet
higher demand)," Danek said.
The central bank has said the deflation risk has been
averted, giving the economy a firmer footing. Other countries
are still flirting with falling prices, including Poland and,
notably, the euro zone, whose central bank's measures to pump
money into the economy include charging banks to deposit funds.
The Czech central bank has committed to preventing the crown
from firming beyond the 27 per euro level at least until the
beginning of 2015, but has said several times that the
probability is rising that the policy may be extended.
The crown traded at 27.48 to the euro on Friday,
and has held in a tight range around that level since March.
DATA CASE GROWING
Data on Friday showed industrial output grew 7.7 percent
year-on-year in April, above expectations, while new foreign
orders increased 16.4 percent. Exports rose 11.2 percent.
That follows first-quarter gross domestic product data that
put economic expansion at 2.5 percent year-on-year, the fastest
in three years. On a quarterly basis, the economy grew by 0.4
percent, above central bank expectations. The HSBC/Markit PMI
manufacturing survey came in at a three-year high this month and
wage growth in the first quarter was the highest since 2009.
The central bank forecasts the economy to expand 2.6 percent
this year after a contraction of 0.9 percent in 2013.
The bank said on Wednesday the GDP data showed a revival in
household consumption and investments had a longer-term nature,
evidenced in retail sales rising for a sixth straight month in
Analysts say the recovery is taking hold both in terms of
external and domestic demand. The better mood is partly down to
a government in power since January which has eased up on budget
consolidation. The state is spending more, helping construction
firms: state railway projects worth 38 billion crowns ($1.9
billion) are seen in 2014, Transport Minister Antonin Prachar
said in March.
Companies are also counting on increased demand from Europe,
especially in the important car sector. TPCA, a car plant run by
Toyota Motor Corp and PSA Peugeot Citroen,
had been hit by falling demand for its small car models in
Europe's slowdown but expects to raise production by 14 percent
this year to 210,000 vehicles.
"This year we are going to recruit another 700 people
because of the renewal of a third shift in October," spokesman
Radek Knava said. "We are expecting production to increase
because of new models and a recovery in the European market."
(Additional reporting by Robert Muller; Editing by Ruth