Czech industrial output fell for a second straight month in August while a drop in new orders suggested the sector's weakness will continue in the coming months, putting a drag on the economy's revival.

Working day adjusted output fell 1.7% year-on-year, less than a Reuters poll forecast of 2.8%, statistics office data showed on Monday, with the car sector helping buoy activity.

New orders fell 4.2% year-on-year after a 3.0% decline in July.

"The August (industry) figures do not deviate from the unflattering picture from this part of the economy in recent months," Banka Creditas chief economist Petr Dufek said, adding it was a likely signal of a possible fall in third-quarter overall economic activity.

"The story remains the same: Firms that have stocks of older orders - especially in the car sector - are running and cutting delivery times. The others are still far worse."

The data comes after figures last week showed Czech retail sales also slipped in August as high inflation weighed on consumer activity.

Industry has become a larger weak spot for economies around central Europe in recent months, highlighting the bumpy recovery ahead.

The S&P Global Purchasing Managers' Index (PMI), published at the beginning of October, showed Czech factory activity took another hit in September as manufacturers shed staff amid continued drops in production and new orders.

The Czech central bank has forecast the economy to stagnate in 2023 with a slight 0.1% rise.

Industry will likely lag, analysts say, especially with weakness seen in Germany, the region's top trade partner.

"Last but not least, production in the rest of the year will continue to contend with a relatively high base, which will mainly concern car production," UniCredit economist Patrik Rozumbersky said.

"Industry will probably not help the stagnant Czech economy too much the rest of this year," he said. (Reporting by Jason Hovet in Prague, editing by Deborah Kyvrikosaios)