* Poor readings in Czech, Polish, Hungarian PMI data
* Romanian growth much stronger than expected
* Business climate falls in central and Eastern Europe
By Michael Winfrey,
PRAGUE, June 2 (Reuters) - Emerging Europe's star economies
are feeling the pinch from the euro zone slowdown, with data
showing signs of a drop off in manufacturing that has been
exacerbated by their strong currencies.
May PMI manufacturing orders for Poland, Hungary and the
Czech Republic fell following grim data from western Europe last
week and economists' forecasts that growth in France and Germany
could slow to close to zero in the second quarter.
Romania's economy grew by a higher-than-expected 8.2 percent
in the first quarter, but analysts said it was probably a "last
hurrah" before the cooling euro zone -- the region's dominant
export destination -- begins to drag on growth.
An April survey released on Monday also showed the business
climate in central and eastern Europe declined as caution grew
among foreign investors about the economic outlook.
Polish PMI dropped to 49.3 points in May, from 50.6 in April
<PLPMI=ECI>, according to data compiled by NTC for ABN Amro. It
was the first monthly reading in three years below the 50 point
mark which indicates a contraction.
For the Czechs, the figure dropped for the second month
running to 51.8, from 54.1 in April. It was the lowest reading
in three years and, over the past two months, the steepest
back-to-back fall in almost seven years of data collection.
Different data in Hungary, where officials from the ruling
Socialists have accused the central bank of impeding growth by
raising interest rates to a three-year high, data showed the PMI
fell to 51.6 in May, from 52.7 in April.
The slowdown complicates matters for central banks, on guard
against surging inflation as high global prices for food and oil
combine with a spike in consumer spending in booming countries
like Romania, Slovakia, Poland and the Czech Republic.
On Monday, Poland's finance ministry estimated inflation at
4.3 percent in May -- well above the central bank's 2.5 percent
target -- leading to renewed calls from members of the bank's
policy board for another rate hike.
"The positive thing to say is although it looks like there's
going to be a slowdown, it's not going to be a huge slump," said
Neil Shearing from Capital Economics.
The Thomson Reuters & OeKB CEE Business Climate index
<REUTERSOEKB> showed the business climate in central and eastern
Europe fell to 49 in April, from 55 in January.
The economic outlook dropped to 34, from 45. A value above
zero signals more positive than negative answers.
CHILL COMING?
Separate PMI index data showed euro zone manufacturing
activity had slowed in May as factory output remained at a near
three-year low.
The RBS/NTC Eurozone Purchasing Managers Index for the
manufacturing sector eased to 50.6, down from April's 50.7.
Separate data from the Chartered Institute of Purchasing and
Supply/NTC for Britain showed PMI falling to 50.0, from 50.8.
Analysts said emerging Europe's overperforming currencies
were taking a toll. Some have spiked since European Union entry
in 2004, making their goods more expensive in a market where
consumers are starting to snap shut their purses.
The zloty has gained almost 30 percent since Poland joined
the EU, while the Czech crown has firmed more than 22 percent.
The Slovaks and Czechs saw slower euro zone demand take
bites out of their high growth rates in last month's flash GDP
estimates of 8.7 percent and 5.4 percent.
On Friday, Poland posted better-than expected 6.1 percent
annual GDP growth, down from 6.4 percent in the fourth quarter.
Regional laggard Hungary crept ahead with 1.6 percent growth
from January to March.
Debbie Orgill from ABN Amro said she expected a slowdown
across the region to more sustainable levels.
"We need to be looking at what growth does in the second
half of the year when we should start to see more cooling off in
some of these countries," she said.
(Editing by Catherine Evans)
