* Czech November industrial output up 15.9 pct
* Hungarian output up 14.5 pct, well above forecast
* Expected slowdown in exports may soften or come later
* Data backs Hungary's move towards higher interest rates
By Michael Winfrey and Jason Hovet
PRAGUE, Jan 7 (Reuters) - A spike in new orders from abroad
boosted Czech and Hungarian industry in November, data showed on
Friday, adding to signs that export demand may not taper off as
much as analysts have forecast.
Central Europe has relied on orders from trade partners,
most notably from its biggest export market in Germany, to power
economic recovery as domestic consumer demand has remained
subdued.
Foreign demand has been expected to dip this year, but
analysts said the latest industry and export data from the
region may point to a softer or later slowdown and backed a
shift towards higher interest rates in Hungary.
Hungary's industrial output <HUIND=ECI> rose by an annual
14.5 percent in November 2010 based on preliminary unadjusted
data after 8.3 percent rise in October, far above the median
forecast in a Reuters poll for an 8.2 percent increase <HUIND1>.
Czech output rose 15.9 percent versus the previous year,
eclipsing the 6.9 percent recorded in October. Analysts had
expected a rise of 11.3 percent. Economists said this would
translate into strong growth in the fourth quarter.
"The development of foreign demand is very favourable,
Germany continues to have strong exports growth... Consumer
confidence, investment demand and household consumption are all
improving," said Vojtech Benda, a senior analyst at ING
Commercial Banking in Prague.
"We are likely to see a very strong fourth quarter GDP
number again."
Currencies in the region shrugged off the data as a weak
euro capped gains.
Other data this week have shown signals that the pace of
recovery is holding up. Purchasing Managers Indexes (PMI), which
track sentiment indicators among manufacturers, picked up
strongly in the Czech Republic and Poland in December, holding
at or near multi-year highs.
And data showed on Friday that Germany's trade balance
narrowed in November as imports gained more than expected, a
sign domestic demand is growing in strength. []
"It seems the German recovery is gathering steam and more
importantly there is more pass-through to central Europe," said
Raffaella Tenconi, an economist at Bank of America Merrill
Lynch. "There are definitely upside risks to growth outlooks."
CARS, RATES
The Czech data was underpinned by an increase in production
of cars and machinery. Czech car production passed the 1 million
vehicle mark for the first time last year.
Volkswagen's <VOWG.DE> Czech unit Skoda Auto -- the
country's biggest manufacturer which exports about 90 percent of
production -- said on Thursday it sold a record 762,600 cars
worldwide in 2010 and expects to continue growing sales thanks
to demand in markets like China and Russia. []
Tenconi said the Hungarian data also supported the stance of
the country's central bank, which hiked interest rates half a
point to 5.75 percent at the end of 2010 in what it said was a
move to fight price pressures caused by government tax changes.
"For Hungary, it adds to the MPC's view lately," Tenconi
said. "We expect another 50 basis points hike -- 25 basis points
in January and 25 bps in February."
Analysts have forecast Hungary's economy expanded 1.0
percent in 2010 <HUGDP1> and will pick up to 2.7 percent growth
in 2011.
Poland is forecast to outpace all economies in the region
this year, and is expected to follow Hungary with rate hikes
early this year.
But the general view is that Czech interest rates -- sitting
at a region-low 0.75 percent -- will not rise until the second
half of 2011 as government budget cuts dent growth prospects.
The Czech central bank has forecast economic growth to be
cut almost in half to 1.2 percent this year. But minutes from a
Dec. 22 meeting showed many policymakers described the figure as
too pessimistic. []
(Editing by John Stonestreet)
