Slovak industry output hits record on car industry

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BRATISLAVA, March 7 (Reuters) - Slovakia's industrial output showed the fastest rise ever in January thanks to a record jump in car production, data showed on Wednesday, underpinning expectations of accelerating economic growth.

Industrial output rose by a real 17.5 percent year-on-year in January, after a revised 9.0 percent increase in December, the Slovak Statistics Office said, beating analysts' forecasts of 10.5 percent growth.

"It is a very good figure. Both the car and electronics industries exceeded our expectations. I think we may see an upside surprise in January export data next week," said Lucia Steklacova, a senior analyst at ING Bank in Bratislava.

Autos production, which is the backbone of the European Union member's economy, increased by a record 126.1 percent on the year in January, after a 74.3 percent jump in December.

Electronics industry output rose by 26.4 percent on the year, which was a slowdown from December's 29.5 percent rise.

"It is a positive figure, which can translate into stronger exports," said Slovenska Sporitelna senior analyst Maria Valachyova. "If this trend is confirmed in the coming months, it would positively influence overall GDP growth."

Separate data showed construction output jumped by 24.1 percent in January with real industrial wages up 8.6 percent, while retail sales growth slowed to 0.9 percent annually.

Wednesday's figures came one day after the Statistics Office said the Slovak economy had posted record growth of 8.3 percent in 2006, one of the highest growth rates in the EU.

The central bank (NBS) and analysts expect GDP growth to accelerate further in 2007 as new car factories of PSA Peugeot Citroen and Kia Motors increase production.

Fast GDP growth is not viewed as a major threat to inflation and to Slovakia's goal to adopt the euro in 2009 because exports are becoming the main driver of economic expansion.

But some market watchers said the red-hot economy and rising industrial output would encourage the NBS to keep cautious monetary policy approach and refrain from rate cuts.

"The NBS will be watching industrial production and if its growth is sustained, it will decrease possibility of interest rates cut currently expected by the market in the second half," analysts at 4Castweb London said.

The central bank has left the key two-week repo rate unchanged at 4.75 percent for five consecutive months and several analysts expect policy easing in 2007 once the bank is confident about meeting the inflation condition for euro entry. ((Writing by Peter Laca and Martin Santa; Editing by Mike Peacock; martin.santa@reuters.com; Reuters Messaging: martin.santa.reuters.com@reuters.net; +421 2 5341 8402))

Keywords: SLOVAKIA ECONOMY/INDUSTRY