* Czech PMI ticks up to 41.9, a 9-month high []
* Polish PMI up to 43.0, 8-month high []
* Hungarian PMI, different method, up to 45.8 []
* Region's currencies rise after PMI data
* Analysts say recovery will be slow
By Michael Winfrey
PRAGUE, July 1 (Reuters) - Manufacturing in the European
Union's biggest eastern nations crept closer to recovery in
June, but PMI data still reflected overall declines due to a
continuing lack of demand from their main market, the euro zone.
Growing investor optimism has driven currencies and equities
to near their highest levels since the worst of the economic
crisis, but analysts say a string of worse-than-expected GDP and
output data indicate the pain in central Europe is far from
over.
Markit's Czech Purchasing Managers' Index (PMI) inched up to
a nine-month high of 41.9 from 40.5 in May and a record low in
January. Its Polish index was up for the second straight month
to 43.0 from 42.55 in June, its highest level since October.
Both were still well below the neutral level of 50,
signalling that a the decline in manufacturing -- which now
extends to a year for the Czech Republic -- was still severe,
even though it was losing pace.
Markit economist Trevor Balchin said the Czech data led to
the best quarterly average since the third quarter of last year,
and appeared to back the Czech central bank's decision to hold
interest rates at a record low of 1.5 percent last week.
"However, the PMI data remain historically weak and still
point to a sharp overall rate of contraction," he said.
For the Poles, the pace of contraction was the slowest seen
since the near collapse of global financial markets last year.
"That said, the PMI gained less ground in the second quarter
than in the first, suggesting that any recovery will be slow and
justifying the latest cut in interest rates," Balchin said.
The Hungarian PMI -- calculated under different methodology
than the Markit data -- ticked higher to 45.8 in June, from a
revised 45.4 in May.
The region's currencies rose after the data, mainly helped
by improved investor sentiment towards more risky assets.
The Polish zloty <EURPLN=> was up 1.04 percent at 4.414. The
Czech crown <EURCZK=> rose 0.77 percent to 25.816, and the
Hungarian forint <EURHUF=> gained 0.8 percent to 270.15.
NEW ORDERS FLAT
The disintegration of demand in the euro zone has driven up
unemployment in central Europe. Many firms have mothballed
production lines and laid off tens of thousands of workers or
put them on short time.
Earlier this week, Czech truckmaker Tatra said it would cut
another 500 jobs, on top of 1,300 already fired, to confront a
large loss due to an much smaller order book.
Analysts cast doubt on the link between companies' optimism
and actual data, saying Czech industry data, which showed a
worse-than-expected 21.7 percent drop in May, did not reflect
the improving PMI numbers, which are based on surveys.
The June PMI output figure jumped for the Czech Republic to
44.1 from 41.9. The May index figure had risen from 39.
David Marek, chief economist at Patria Finance, said one
reason could be that the May output drop could be the last bad
figure in the series, and June and July could show improvement.
"It seems that the worst is over for the economy, and output
can fall, but not as quickly as in the first and second
quarters. But it's clear that second quarter GDP will be another
awful figure," he said.
"What's most important for the Czech economy is demand
abroad. If we see an improvement in Germany, France, and other
euro zone countries, the Czech situation can improve."
For the Poles output was also up in June to 43.1, from 42.7
the previous month. Hungary's output was up to 45.0, although
new orders fell by 0.3 percentage points to 45.1.
Analysts were cautiously optimistic but were careful not to
overstate the gradually improving figures. "It certainly says
that there is a recovery going on but ... it's going to be slow
in the near term," said Raffaella Tenconi, chief economist at
Wood & Co.
(Reporting by Michael Winfrey; editing by David Stamp)
