INSTANT VIEW 1-Czech PMI contraction continued in November

                                
 PRAGUE, Dec 1 (Reuters) - The Czech Purchasing Managers'
Index (PMI) dropped to 37.8 in November, from 41.2 in October,
falling below the critical 50.0 mark for the fifth consecutive
month, Markit Economics and ABN Amro said on Monday.
****************************************************************
KEY POINTS:
                                
                                11/08      10/08      11/07
 Purchasing Managers' Index        37.8       41.2       54.9
 Output                            36.7       40.3       56.6
 New orders                        31.9       36.2       56.4

(Full table of data.............................[ID:nPRA002243])

                                
 - A figure above 50 indicates expansion on the previous month
while a number below 50 signals contraction.
                                
 - The composite indicator, designed to provide a
single-figure snapshot of manufacturing performance, posted a
level below the no-change mark of 50.0 for the fifth successive
month in November.
                                
 - The Czech manufacturing sector continued to endure a
sharply deteriorating business climate in November. The headline
index signalled a rapid rate of contraction.
                                
 - Production in the Czech Republic declined at a rapid pace
in November. Output index fell sharply to a new low of 36.7,
from 40.3 the previous month. Output has declined continuously
since July.
                                
 - Firms linked falling production to sharp falls in new work
from both domestic and export clients. A number of panellists
specifically mentioned a demand crisis in the automobile
industry.
                                
 - The volume of incoming new business received by Czech
manufacturers declined at a survey-record pace in November. New
orders plunged to a new low of 31.9, from October's 36.1, and
has remained below the neutral level of 50.0 for the past four
months.
                                
 - New export orders fell in November at a faster rate than
in any other survey period, as signalled by the latest index
reading of 33.9.
                                
 - Western Europe and Germany in particular were highlighted
by firms as key sources of falling new orders. The current
five-month period of decline in new export business is the
longest registered in over seven years of data collection.
                                
 - Average input prices declined at a survey-record pace in
November. The input prices remained below the no-change mark of
50.0 for the second month running and slumped to 41.5, just
beating the previous low of 41.6 set in April 2002.
                                
 - Firms reported a wide range of inputs coming down in
price, including metals, food, wood and paper, against a
backdrop of falling oil prices.
                                
 - Lower output prices also reflected reduced pressure on
costs during the month. Input prices fell sharply with firms
reporting lower costs for oil derivatives, food, metals and wood
products. That said, firms still targeted cost savings which
resulted in redundancies and cuts to input stocks.
                                
 - Czech manufacturers shed staff for the fifth successive
month in November. That was the longest period of continuous
decline in over five years, reflecting sharp falls in output and
new orders. Employment index fell for the fifth month running to
a new low of 38.9, indicating a substantial rate of job losses
in the sector.
                                
 - Czech manufacturing sector continued to endure a sharply
deteriorating business climate in November. Moreover, many
survey variables had showed that the pace of contraction had
accelerated further as a wider economic slowdown took hold.
There was subsequently little inflationary pressure, with both
input and output prices declining over the month.
                                
 
                                
 COMMENTARY:
                                
 DOMINIC WHITE, GLOBAL ECONOMIST, ABN AMRO, LONDON
                                
 "The accelerating contraction in output should signal a
concern for the Czech authorities, reinforcing expectations of a
revision to budget assumptions (the government had been
expecting growth at 4.8% y/y in 2009) and further interest rate
cuts from the CNB. Falling charge levels support the Bank's
reactive approach to activity rather than headline inflation."
                                
 
BACKGROUND:
- Report on last Czech c.bank rate decision........[ID:nL686132]
                                
                [ID:nL6147578] [ID:nL6239772] [ID:nPRG001095]
- September foreign trade figures.................[ID:nL5211528]
- September industrial output.....................[ID:nLB624953]
- Second-quarter GDP growth data................. [ID:nLE914840]
                                
                                               [ID:nLE732620]

LINKS:
- For LIVE Czech economic data releases, click on       <ECONCZ>
- Instant Views on other Czech data                 [CZ/INSTANT]
- Overview of Czech macroeconomic indicators            [CZ/ECI]

- Key data releases in central Europe    [CEE-CONVERGENCE-WATCH]
- For Czech money markets data click on                <CZKVIEW>
- Czech money guide                                      <CZK/1>
- Czech benchmark state bond prices                   <0#CZBMK=>
- Czech forward money market rates                      <CZKFRA>

 (Reporting by Mirka Krufova; editing by David Stamp)