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PRAGUE, Sept 1 (Reuters) - The Czech Purchasing Managers'
Index (PMI) continued to show the country's severe manufacturing
contraction has passed its worst phase mid-way through the third
quarter, Markit Economics said on Tuesday.
Overall manufacturing PMI inched up to 47.1 from 43.5 in
July staying for the 14th straight month below the neutral 50
mark that marks the border between a rise and a fall.
But the industrial sector, the backbone of the export-heavy
Czech economy, cleared that hurdle for the first time since June
2008, rising to 51.5, from 45.8 the previous month.
PMI has improved every month since January's record low of
31.5, signalling that the worst phase of the downturn has
passed. Moreover, the latest gain in the headline index was the
second-steepest in over eight years of data collection.
The rise in industry was the eigth in a row since a December
record low and the biggest points gain in the series to date.
The Czech economy shrank by 4.9 percent year on year in the
second quarter, but grew 0.3 percent from the previous three
months, according to an official flash estimate last month.
Preliminary data for July industrial output showed a
higher-than-expected 18.4 percent year-on-year drop on last
Friday, and new orders fell by 22.7 percent.
The August PMI data signalled a rise in new orders received
by Czech manufacturers, the first increase since last summer.
Higher receipts of new work compared to one month earlier
were primarily attributed by survey respondents to rising
customer numbers and an improvement in market demand.
That said, the rate of expansion signalled was only marginal
and, as with production, was well below the long-run average for
the series, Markit said.
Czech manufacturers continued to cut jobs in August, despite
the new orders. Employment remained at a level indicative of a
marked rate of job shedding in the sector, with over one-quarter
of companies reporting reduced workforces. However, the
reduction in headcounts in August was the least severe than in
the preceding nine months.
Poland's purchasing managers' index rose in August to a
15-month high, but was still stuck below the breakeven 50 level
dividing contraction from growth. []
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KEY POINTS:
08/09 07/09 08/08
Purchasing Managers' Index 47.1 43.5 47.3
Output 51.5 45.8 45.7
(For table, double click on......................[]
- A figure above 50 indicates expansion on the previous month
while a number below 50 signals contraction.
MARKET REACTION
The Czech crown weakened a touch to 25.465 per euro, from
25.435 before the data.
COMMENTARY:
PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT PRAGUE
"A solid increase against the last month. Although the index
has stayed under the level separating an increase from a
decline, it is, I would say, a positive, hopeful change over the
past months."
"I think it has a certain forecasting ability in a horizon
of several months, so I would translate from this figure that
already this fall should be less bad for industry that the first
half."
"From the PMI point of view we are already at a level of
August of last year. The stats office shows a figure worse than
in November, which means after the crisis came."
"So that makes the hope for the future a bit more uncertain.
We will se which one of the indicators is closer to reality."
MARTIN LOBOTKA, ECONOMIST, CESKA SPORITELNA
"The number means the drop is continuing to slow down."
"It is copying the same trend in (western) Europe. It is
still below 50, which is the border that divides contraction and
growth... June, July, and August are affected by stock piling
and the scrap subsidy in Germany, and it should hit the 50 level
in two months.
"Whether it will remain (above 50) is hard to tell at this
point."
MIROSLAV FRAYER, ECONOMIC AND STRATEGY RESEARCH, KOMERCNI
BANKA
"The number is definitely positive. It shows that similarly
to the indexes that we see in the euro zone (this number)
indicates a gradual recovery also here in the Czech Republic."
"It is copying, with some delay, the development in the euro
zone."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"PMI in the Czech Republic, and Poland as well, are both
improving. It is maybe misleading to look at the latest
industrial figures, which worsened. PMI figures are looking
forward, and it may be more important to look at the months to
come than looking back."
"It is positive guidance for the Czech economy... and in
line with developments in western Europe and the global economy.
"So the Czech Republic should emerge definitely from
recession and production statistics should be better. On the
other hand, the labour market is still waiting for an impulse to
improve."
JULIET SAMPSON, CHIEF ECONOMIST for EMERGING EUROPE at HSBC
"The sharp rise in the August PMI provides a building sign
of recovery in Czech Republic. While the composite index remains
below the key 50 level, the manufacturing output index has moved
into positive territory, heralding the likelihood of growth in
the sector before long."
"A noticeable improvement in new export orders points to
recovery in Czech Republic's key Western European export markets
and a possible move into positive levels by September. However,
continued weakness in the employment index points to a likely
deterioration in consumption in the months ahead and possibly a
weak recovery in economic activity."
BACKGROUND:
- Report on last Czech c.bank rate decision.......[]
[] [] [] []
- June foreign trade figures......................[]
- July industrial output..........................[]
[]
- Second-quarter GDP data........................ []
LINKS:
- For LIVE Czech economic data releases, click on <ECONCZ>
- Instant Views on other Czech data []
- Overview of Czech macroeconomic indicators []
- Key data releases in central Europe []
- For Czech money markets data click on <CZKVIEW>
- Czech money guide <CZK/1>
- Czech benchmark state bond prices <0#CZBMK=>
- Czech forward money market rates <CZKFRA>
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(Reporting by Mirka Krufova)
