By Jason Hovet
PRAGUE, Feb 11 (Reuters) - Industrial output in the Czech
Republic plunged for a third straight month in December and the
statistics office said it indicated the economy may have already
contracted in the last three months of 2008.
Another of central Europe's industry-heavy economies,
Hungary, is widely expected to report a fourth contraction
because of a collapse in demand in the euro zone, their main
market, for the cars and electronics the region produces.
Czech output dropped by 14.6 percent year-on-year in
December, worse than forecast and, when adjusted for working
days, an acceleration from November when the headline fall
reached 17.4 percent.
Analysts, expecting an 11.0 percent fall, said the eroding
picture would give more ammunition for the Czech central bank to
continue slashing interest rates and could strengthen calls for
the government to provide fiscal stimulus.
The stats office said the drop could have meant the economy
contracted last quarter and it may not have begun to recover.
"From the drop (in industry) we can conclude a certain drop
in gross domestic product performance (growth) in the fourth
quarter, but we do not know how much because we have not made
the calculations," said Josef Vlasek, head of industry
statistics.
"The drop in orders in the fourth quarter indicates that the
first months of 2009 will not be the time when a recovery should
come."
He added: "The pace (of GDP) will be slower. I cannot say
now if it will be a minus. I do not exclude it."
Foreign orders in December sank nearly 30 percent for a
second straight month, the data showed.
The Czech crown <EURCZK=> slipped to as low as 28.699 after
the data from 28.555, but later rebounded to 28.52 by 0850 GMT.
The data mirrored a fall in production in neighbouring
Slovakia [], the most prolific car-producing country
in the world per capita, and a slowing in consumer price growth
across the region.
RATES TO HEAD LOWER
The Czech central bank has slashed interest rates by 2
percentage points since last year to 1.75 percent.
Last week, it forecast a 0.3 percent contraction in the
economy for this year.
And although bank Governor Zdenek Tuma said he could imagine
the easing cycle was near its end, analysts said the dire
production figures indicated more cuts, with many expecting a
trough of 1 percent.
Some said the Finance Ministry, working on budget
alternatives for up to a 2 percent contraction in 2009, may also
step in with more spending to boost the economy.
"Despite a Czech central bank warning, interest rates will
likely continue to fall and preparations of a fiscal stimulus
package should speed up," said David Marek, chief economist at
Patria Finance.
Czech, Slovak and Hungarian fourth quarter 2008 GDP data are
due out on Friday. <ECONCZ><ECONSK><ECONHU>
Hungary is expected to contract by about 3 percent this
year, while Poland and Slovakia are expected to eke out modest
growth, but some analysts have said all emerging European
countries may face the prospect of a recession this year.
For a TABLE on the data, click on []
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(Reporting by Jason Hovet; Editing by Ruth Pitchford)
