Confidence in the Czech economy is high.

In a March 27, 2007 press release, the Czech Statistical Office (CSU) released the findings of its March 2007 consumer confidence survey. The results showed both the composite indicator and the consumer confidence indicator stood at record high levels.

The CSU's composite indicator includes indexes for industry, business, retail, and construction as well as consumers.

The CSU said, "Consumers expect improvement of both the general economic situation and their own financial standing."

A separate CSU release, dated April 12, 2007, reported that the March 2007 unemployment rate declined 0.4 percent when compared with the February 2007 rate. At the end of March 2007 the unemployment rate for the Czech Republic was 7.3 percent, down 1.5 percent from March 2006. In January 2006, unemployment was 9.2 percent.

Consumer perception of the employment situation is not always informed by government statistics. Experience in the workplace plays a much more vital role.

In its consumer surveys in March 2007, when the CSU asked consumers about their expectations about employment, "The percentage of consumers expecting higher unemployment, decreased."

This demonstrates that consumer favorable perceptions of employment are tracking with the official statistics, and offers a partial explanation why confidence in the Czech economy is at record levels.

Consumer confidence usually translates into higher retail sales, and among the basic indexes calculated by the CSU the retail sales index also stood at a record high level.

The Czech economy has been doing well in recent months. Obviously, unemployment is still high, but it is declining.

In its review of the Czech economy released on February 13, 2007, the Organization for Economic Cooperation and Development (OECD) said, "Stringent employment protection is dampening labour turnover, thus contributing to high long term unemployment in the labour market, with potentially adverse effects on productivity." To combat this, the Czech government introduced a, "less constraining labor code," in 2006.

But this does not go far enough and the OECD called on the Czech government to reduce severance pay for short term workers, and to make firing easier.

It is unclear if the new labor code is responsible, but the CSU reported in the April 2007 release cited above that, "Labour productivity grew faster than [the] increase of average wages; therefore unit wage costs decreased by 5.5%."

In 2006, the International Monetary Fund (IMF) estimates the Czech economy grew by 6.1 percent. For 2007, the IMF says growth will decrease noticeably to 4.8 percent, and will grow even less strongly at a forecast 4.3 percent in 2008.

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