Factories Investing to Counter Labor Shortage Drive Czech Growth

(Bloomberg) -- A deepening labor shortage is forcing Czech companies to spend more money on automation and other upgrades to satisfy rising demand, which helped drive economic growth to its fastest pace in two years in the third quarter.

Gross domestic product surged 5 percent from a year earlier, the Czech Statistics Office said on Friday. The biggest contribution came from investment spending, which added 1.6 percentage points to overall growth, followed by household spending and net exports with 1.5 percentage points each, the office said.

“Businesses are adjusting to meet increasing demand at a time when it’s practically impossible to find new workers in the labor market,” said Komercni Banka AS economist Viktor Zeisel. “They are investing in means of production that require fewer human operators, to free up part of their workforce.”

The lowest unemployment rate in the European Union is also driving demands for higher salaries, upending the economic model based on manufacturing industries benefiting from lower labor costs compared with western Europe. The country of 10.6 million is now relying heavily on the export of cars, auto parts and electronics, and many economists say it needs to shift to more sophisticated technologies and services to continue catching up in living standards with richer EU nations.

To contact the reporters on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net, Radoslav Tomek in Bratislava, Slovakia at rtomek@bloomberg.net.

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Peter Laca, Michael Winfrey

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