UPDATE 1-Czech trade on track for record surplus in 2007

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By Marek Petrus

The Czech foreign trade balance posted a sixth consecutive monthly surplus in June, leaving the European Union country's booming economy on track to post a record-high surplus for the whole year.

The monthly surplus in exports and imports of merchandise goods rose to 9.3 billion crowns ($458.4 million) from 7.4 billion in June 2006, the statistics office said on Tuesday.

The figure was broadly in line with the market consensus forecast of an 9.5 billion crown surplus .

Overall exports grew a nominal 14.5 percent year on year, while nominal imports were up 14.0 percent. Exports of cars, computers and other industrial equipment jumped by 16.3 percent.

The rise in the country's foreign trade surplus has been fed by foreign investment in automotive, electronics and other industries and a recovery in key export markets in western Europe.

"For the first time since 2001, the euro zone's growth dynamics have outpaced that of the U.S. GDP, which will be fully reflected in record revenues of Czech exports," said Ales Michl, analyst at Raiffeisenbank.

He said the crown's slide to 15-month lows around 28.775 to the euro during June helped boost companies' export revenue.

The crown, a popular source of cheap funds for investors because the 3 percent Czech policy rate is the lowest in the EU, has shed 2 percent in the year to date. It barely budged on the data, trading at 28.068 to the euro by 0815 GMT.

"REACHING LIMITS"

Germany's Volkswagen unit Skoda Auto, a joint plant of Japan's Toyota and France's Peugeot and electronics makers such as Taiwan's Hon Hai and Japan's Matsushita have become leading Czech exporters.

Vast numbers of suppliers have set up shop in the relatively low-cost Czech Republic to cater to the export-oriented manufacturing firms, which have been attracted by the country's developed infrastructure and proximity to other EU markets.

Guardian Industries, a U.S. producer of glass and other car parts, announced earlier this week a plan to spend 600 million crowns ($29.57 million) on a new factory employing 230 workers.

However, some analysts cautioned manufacturing export growth might be peaking amid signs the strong economy was drying up the pool of available labour. Growth has topped 6 percent in the past eight quarters.

"Exports of machinery and transport equipment -- the key driver of the trade surplus until now -- seem to be reaching their limits," said Pavel Sobisek of UniCredit Global Markets.

"Mid-term we expect the trade balance to show a less benign picture," he added.

The cumulative surplus for the past 12 months nearly doubled to 63.2 billion crowns, or 1.8 percent of 2007 forecast gross domestic product (GDP) according to Reuters calculations.

Analysts said they expected the trade balance improvement to slow in the second half but stuck to their forecasts of a record full year 2007 surplus of between 60 and 70 billion crowns following a 43 billion crown 2006 surplus.

INSTANT VIEW OF MARCH TRADE DATA.............[ID:L07648705]

[PRAGUE/Reuters/Finance.cz]