* Czech Jan unemployment jumps to 6.8 pct, vs 6.0 pct in Dec
* Slovak industrial output slumps 16.8 pct yr/yr
* Czech Jan inflation slows to 2.2 pct, near bottom of
central bank's target range
* Romanian 2008 trade gap grows 3.4 pct yr/yr
By Michael Winfrey
PRAGUE, Feb 9 (Reuters) - The Czech jobless rate jumped by
almost a percentage point in January and Slovak industry showed
its worst contraction in a decade, as evaporating demand from
the euro zone batters ex-communist central Europe.
Some economists believed the Czechs may have followed
Hungary into recession last quarter and the situation is likely
to worsen as factories across the region slash tens of thousands
of jobs and cut hours, particularly in car and electronics
plants.
Czech unemployment rose to a higher-than-expected 6.8
percent of the workforce in January, from 6.0 percent a month
earlier and 6.4 percent forecast by the Reuters poll.
"What we're seeing is a recession that has its roots in
manufacturing. I'm pretty sure it will spread and engulf the
entire economy -- including the retail and consumer side -- over
the next six to 12 months," said Neil Shearing, an economist at
Capital Economics.
"The feed through will be into a deterioration in the labour
market. We've already seen a jump in the Czech jobless rate and
I think that will continue and it could get to 10 percent quite
easily."
Other data showed Czech inflation slowed to 2.2 percent in
January, near the bottom of the central bank's target range,
clearing the path for further interest rate cuts to underpin the
economy. [].
INDUSTRY CRUMBLING
The Czech central bank's 2009 annual inflation target is 3
percent, plus or minus 1 percentage point, and analysts said the
slowdown in price growth meant it would most likely continue
cutting rates from 1.75 percent now.
"More rate cuts towards 1.25 percent seem likely in the
coming months," said Vojtech Benda, senior economist at ING
Wholesale.
Other data showed Slovak output fell by 16.8 percent
year-on-year in December, the sharpest fall in 10 years
[].
It was led by an 18.8 percent fall in manufacturing
production versus a year earlier, including a 35.7 percent fall
in production in the car industry, which makes up more than a
fifth of Slovakia's economy.
Regional trade data out Monday showed that falls of up to 30
percent in emerging EU currencies against the euro since the
second half of 2008 have begun to unravel wide external
imbalances.
But analysts said that while weaker currencies would help
trade deficits by making imports more expensive, the idea that
they would help the export-dominant region climb out of
recession any time soon was misplaced.
In Romania, where the leu has lost 17 percent against the
euro, data showed the 2008 trade deficit had grown by a modest
3.4 percent versus a year earlier [] , while in
Hungary, where the forint has lost 19 percent since the end of
July, the December trade deficit shrank 40 percent.
"Any idea that a weaker currency will somehow lead to an
export-based recovery seems a bit far-fetched when you've got
demand everywhere in the world collapsing," Shearing said.
(Additional reporting by CEEU Reuters bureaus; Editing by Toby
Chopra)
