Slovak June industry growth slows, GDP seen strong

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Slovakia's industrial output growth slowed more than expected in June, data showed on Wednesday, but analysts said production figures remained solid and signalled strong economic expansion in the second quarter.

Industrial production rose by 12.0 percent on the year in June, compared with 17.4 percent growth in May, with the car sector growing strongly, the Statistics Office said.

The market forecast a 15.5 percent increase for June.

"The data is modestly disappointing, but despite the recent fall, the three-month average remains strong at 14.7 percent," said Piotr Matys, analyst at 4Cast in London.

Analysts said the deceleration was partly due to a 14.8 percent fall in utilities' production. Lower than expected output in some manufacturing sectors also played a role.

"The biggest disappointment is in manufacturing, except for the car sector," said Eduard Hagara, analyst at ING Bank in Bratislava. "We expected a stronger rise because companies usually boost output ahead of holidays."

Car production, the key sector of Slovakia's booming economy, rose by 70.5 percent from a year ago in June, after a 76.1 percent jump in the previous month.

Car output was expected to slow in July and August due to traditional summer breaks at factories of Volkswagen , PSA Peugeot Citroen and Kia Motors .

Analysts were split over the impact of Wednesday's production data on June foreign trade statistics, due on Friday, but said the figures signalled strong gross domestic product (GDP) growth in the second quarter.

"This result indicates that (June) foreign trade data could show a year-on-year improvement. GDP growth in the second quarter could also maintain its strong pace," said Juraj Valachy, analyst at Tatra Banka.

ING's Hagara saw a risk the foreign trade gap could be deeper than his forecast of 0.5 billion crowns ($20.65 million), but expected second quarter GDP growth between 9 and 10 percent.

The Slovak economy grew by 9 percent year-on-year in the first three months of 2007, making it one the fastest growing nations in the European Union. Analysts expected second quarter data to surpass growth from the first three months. ($1=24.21 Slovak Crown)

Keywords: SLOVAKIA ECONOMY/INDUSTRY

[BRATISLAVA/Reuters/Finance.cz]