* Czech Q2 GDP down 5.5 pct y/y, biggest drop since 1993
* Hungarian, Slovak, Romanian output fall further
* Some green shoots, but recovery seen slow
By Gergely Szakacs
BUDAPEST, Sept 8 (Reuters) - A steep downward revision in
Czech second-quarter GDP and weakness in output across central
Europe showed the fragility of the region's recovery on Tuesday.
The Czech economy shrank 5.5 percent on an annual basis in
the second quarter, more than a flash estimate of 4.9 percent,
the steepest decline since 1993 and prompting some economists to
revise their full-year GDP projection. []
Hungary's economy meanwhile contracted by an annual 7.5
percent in the second quarter <HUGDP=ECI>, less than a
preliminary estimate for a 7.6 percent decline [],
but industrial output in July fell more than analysts expected.
Quarter-on-quarter growth of 0.1 percent in Czech GDP was
driven mainly by household demand in the second quarter but
lower inventories and a slump in investments still weighed.
Analysts said although the Czech headline numbers looked
disappointing there was hope the economy has passed the worst,
while in Hungary the statistics office said there were some
green shoots emerging, primarily in the construction sector.
"Most recent GDP releases in the region were a downside
surprise to markets and showed that real economies in the region
remain fragile," said Gyorgy Barta, analyst at CIB Bank in
Budapest.
"Czech and Romanian figures came out below the market
consensus, the contraction in Hungary is still deep and the
former front-runner Slovakia is still disadvantaged by its high
reliance on a few sectors that were heavily affected by the
crisis," he added.
Slovak industrial output fell a bigger-than-expected 21.6
percent year-on-year in July, the 10th consecutive month of
decline, hurt by a decline in car production [] while
Hungary's output <HUIND=ECI> fell by an annual 19.4 percent in
July, faster than analysts' projection for 17.7 percent.
Analysts said the data would likely lend support to further
monetary easing by the Hungarian central bank at its next
meeting this month after cumulative cuts of 150 basis points in
July and August to 8 percent<NBHI>.
"Overall the released figures underline the fragile nature
of the recovery of the Hungarian economy and supports further
rate cuts by the NBH probably by 50 bps as early as September,"
Unicredit analyst Gyula Toth said in a note.
SIGNS OF RECOVERY
Analysts said the data also showed some tentative signs of a
recovery in the region after steep falls in output over the past
months due to a collapse in demand in key west European markets.
"There is some hope given the sharpest drops in inventories
and investment are now likely behind the (Czech) economy and
trade continues to contribute to growth given the latest trade
balance numbers," said Peter Attard Montalto, analyst at Nomura.
Hungary's July output fall, which followed two successive
months of increase on a monthly basis, came on the back of weak
domestic and export demand, but the decline in output was
expected to slow, analysts said.
"The rate of decline should slow down during the next few
months as the European cycle recovers and Hungarian industry
reaches a bottom," CIB's Barta said.
Hungary's construction sector, a key driver of past growth,
has hit bottom and signs of recovery are emerging, but the
rebound will be slow and banks remain reluctant lenders,
industry experts told Reuters last week.[]
Romania's adjusted industrial output <ROIP=ECI> was flat on
the month in July and fell 6.9 percent year-on-year, showing
some signs of recovery in the country's shrinking economy.
[]
"The industry entered a slight improvement trend. But we
should remember that this is a year of restructuring and
investment is at very low levels," said Unicredit's Rozalia Pal.
(Reporting by Reuters bureaux, writing by Gergely Szakacs)
