* Polish PMI flat at 48.2, output falls slightly to 50.5
* Czech PMI creeps higher to 49.5 vs 47.1 in August
* Hungarian PMI, different methodology, 49.0 vs 46 in Aug
* Analysts say risk of repeated slowdown remain
By Michael Winfrey
PRAGUE, Oct 1 (Reuters) - Manufacturing held ground or moved
closer to recovery in September in the European Union's biggest
ex-communist economies, data showed on Thursday, but analysts
warned of a possible double dip slowdown on the horizon.
Industry-heavy eastern Europe is clawing back from recession
in all but its largest member Poland, which looks set to be the
only EU state to avoid economic contraction this year but showed
stagnation in manufacturing this month.
The Czech PMI edged closer to the 50 break-even point that
marks the barrier between expansion and contraction, rising to
49.5 from 47.1 in August, Markit Economics said.
Production and new orders cleared that hurdle for a second
month in a row, and the new export orders index edged above 50
for the first time in 15 months.
Poland's PMI was flat at 48.2, ending a run of seven monthly
increases this year. Seasonally adjusted output fell slightly
but was still above 50 at 50.5.
Hungary's PMI, compiled under different methodology than the
Markit data, rose to 49.0 in September from 46.0.
Analysts said the data was positive and showed a continued
climb toward recovery.
But they said the structure of production faced risks ahead,
not least after a long draw-down of inventories and the
approaching end to car-scrap subsidy schemes in the euro zone
that pushed up orders for eastern-made cars.
"At least part of the industrial rebound has been due to the
slowdown in the pace of inventory rundowns, and then also you've
got the car schemes too," said Capital Economics analyst Neil
Shearing.
"That just brings demand forward and raises the risk of a
double-dip recession next year. On the face of it, (the PMI data
is) good news, but there are still plenty of reasons to be
cautious."
DOUBLE DIP?
Clear signs of improvement appeared in other data on
Thursday with a much-lower-than expected drop in Czech
industrial output, which fell just 8.1 percent year-on-year in
August, decelerating from a 18.2 percent fall in July.
It was the first single-digit fall after nine months of
double-digit drops. Analysts had forecast a 12.5 percent fall.
But risks remain. The Czech central bank has said it expects
a "W"-shaped recession, with positive growth increasing and then
dipping back towards zero in the middle of next year.
And on Thursday Czech carmaker Skoda <VWOG.DE> said it was
considering halting production for two days this month.
Skoda, the largest Czech company by sales, said the idea was
tied to a fall in demand following the end of a German scheme in
which consumers received government funds to buy new cars.
"Overall we expect that the entire processing industry, due
to an end of the scrap subsidy, (will) cool and recovery in the
dynamics will slow down," said Jaromir Sindel of Citibank.
Poland, with its region-leading 38-million domestic consumer
market, is also expected to show weaker growth through around
2011 and worries persist over next year's sharply higher budget
deficit target and over public debt, which may breach a second
safety level of 55 percent of gross domestic product.
But Poland is still less dependent on industry and exports
than the Hungarians and Czechs, whose economies are 70-80
percent driven by sales abroad, and analysts said its recovery
picture, while still not completely clear, was positive.
"A protracted decline in employment suggests consumption may
falter in the months ahead and that 3Q GDP is softer than 2Q,"
Juliet Sampson, chief economist for emerging Europe at HSBC.
"However, Poland appears to have avoided recession ... and
while the recovery may slow, it is unlikely to stop."
(Reporting by Reuters Polish, Hungarian and Czech bureaus;
Editing by Victoria Main)
