INSTANT VIEW 1-Czech PMI falls to three-year low

                                
 PRAGUE, June 2 (Reuters) - The Czech Purchasing Managers'
Index (PMI) dropped to 51.8 in May from 54.1 in April, NTC
Research and ABN Amro said on Monday, the weakest reading in
three years.
****************************************************************
KEY POINTS:
                                
                               MAY 08    APRIL 08    MAY 07
 Purchasing Managers' Index        51.8       54.1      55.8
 Output                            52.6       56.1      58.3
 New orders                        52.5       54.8      56.5

 (Full table of data...............................[nPRA001942]

- A figure above 50 indicates expansion on the previous month
while a number below 50 signals contraction.
- The headline index has held above the neutral mark of 50.0
since March 2003.
- The PMI dropped for the second month running, giving the
lowest reading in three years. The fall in the headline index
over the past two months is the steepest back-to-back fall
recorded in almost seven years of data collection.
- May data pointed to a further sharp easing in growth of
manufacturing production in the Czech Republic. Output index
fell to 52.6, from 56.1, its lowest level in three years and
indicative of only a moderate rate of expansion. Over the past
two months the index has fallen by an unprecedented 8.1 points.
- New orders to Czech manufacturers rose at only a moderate pace
in May. New orders index declined for the second month running
to a 37-month low of 52.5. A stagnating global market was
frequently mentioned by firms, while orders also tailed off in a
number of cases because clients had previously brought forward
contracts in order to build stocks.
- Input prices continued to rise at a marked rate in May, driven
by metals, food, energy and oil-related commodities. That said,
inflationary pressure remained weaker than in the first quarter
of 2008 and firms raised output prices at the fastest rate in
three months.
- The size of the Czech manufacturing workforce shrank for the
first time in almost three years in May. The employment index
eased below the neutral level of 50.0 for the first time since
June 2005, to 49.8, though this figure indicated only a very
slight rate of job shedding. Lower staffing levels were most
commonly linked by panellists to cost cutting as new order
growth softened.

                                
 COMMENTARY:
                                
 DEBBIE ORGILL, SENIOR ECONOMIST, ABN AMRO, LONDON
                                
 "The PMI reading for May shows evidence of a clear slowdown
both in domestic and external manufacturing activity. The strong
exchange rate is clearly proving to be an additional negative
for the export sector and really for the first time employment
is registering a contraction. Input price developments
deteriorated modestly once again on the back of higher commodity
inflation but margins remain healthy. This is consistent with a
neutral monetary policy stance by the Czech National Bank."
                                
 
BACKGROUND:
- Report on most recent interest rate decision...[ID:nL07566510]
                                
                              [ID:nPRG000791] [ID:nPRG000808]
- March foreign trade figures....................[ID:nL06905329]
- March industrial output........................[ID:nL12109554]
- Fourth-quarter GDP growth data.[ID:nL07781419] [ID:nL07180650]

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 (Reporting by Mirka Krufova; editing by David Stamp)