PRAGUE, Sept 1 (Reuters) - The Czech Purchasing Managers'
Index (PMI) dropped to a record low 47.3 in August from 49.9 in
July, falling below the critical 50.0 mark for the second month
running, Markit Economics and ABN Amro said on Monday.
It was also the first back-to-back contraction of the sector
in almost six years.
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KEY POINTS:
AUG 08 JULY 08 AUG 07
Purchasing Managers' Index 47.3 49.9 58.8
Output 45.7 49.9 61.2
New orders 45.0 50.2 60.3
(Full table of data...............................[]
- A figure above 50 indicates expansion on the previous month
while a number below 50 signals contraction.
- The headline index falls from 49.9 to 47.3, the lowest
figure since data were first collected in July 2001.
- The overall contraction of the manufacturing sector in
August reflects a further fall in output and the first decline
in new business since September 2002. In both cases, the rate of
contraction is a survey record.
- Latest data and anecdotal evidence suggest both domestic
and export market conditions weaken during the month, with a
specific mention given to an EU slowdown impacting on export
sales and the strong currency undermining firms' international
competitiveness.
- The production declines for the second month in a row in
August. The latest sub-50 reading from the output is only the
fourth in the series history. Moreover, the index slumps to a
new survey low of 45.7, indicating a sharp rate of decline.
- The volume of incoming new business received by Czech
manufacturers declines for the first time in almost six years in
August, as signalled by the new orders index falling below the
neutral level of 50.0. Moreover, the latest reading of 45.0 is
the lowest in the survey history and indicates a sharp decline.
- New export business in the Czech manufacturing economy
declines for the second month running in August, the first
back-to-back fall since March 2003. The new export orders fall
sharply to a new low of 44.5, indicating a strong contraction.
- Accompanying an overall contraction of the manufacturing
economy is a weakening of inflationary pressure on firms' input
costs in August. Input price inflation eases sharply to a
fifteen-month low, although energy, metals and plastics are
again quoted as driving up firms' costs overall.
- Falling new order volumes and the resulting drop in output
impact on firms' purchasing and hiring decisions in August.
Manufacturing employment decline for the third time in four
months - and at the fastest pace in five years - while purchases
of inputs fall at a survey-record rate.
COMMENTARY:
AGATA URBANSKA, EMERGING MARKETS ECONOMIST, ING
"The trend continues downward. The drop is bigger in the
Czech Republic, which is more dependent on Germany for
exports... and exports as a percentage of GDP is bigger."
NEIL SHEARING, EMERGING EUROPE ECONOMIST, CAPITAL ECONOMICS
"All in all the data shows the economy is going to continue
to slow this year and in 2009."
RAFFAELLA TENCONI, ECONOMIST, DRESDNER KLEINWORT
"The drop in the PM confirms the gloomy message of the other
business survey results released recently. This just reinforces
our view that there are downside risks even to the (Czech
central bank's) new growth projections and further monetary
loosening is likely in the near term."
MIROSLAV FRAYER, ANALYSTS, KOMERCNI BANKA
"The number confirms the trend of slowing growth and further
contraction of economic activity. It confirms the trend already
shown in recent macroeconomic data."
"The Czech economy is slowing as a result of a euro zone
slowdown and the strong crown, and this (number) is another
signal for the central bank to consider another rate cut."
DEBBIE ORGILL, SENIOR ECONOMIST, ABN AMRO, LONDON
"The Czech manufacturing sector suffered further from
slowing global demand and also the strong domestic currency
during August."
"Although the currency has given up recent gains against the
euro after the National Bank alluded to near-term interest rate
cuts it is too early to see any benefits for the exporters. On
the positive side price components continue to moderate and
support the recent decision to lower official interest rates."
BACKGROUND:
- Report on last Czech c.bank rate decision []
[] []
- June foreign trade figures......................[]
- June industrial output...........................[]
- Second-quarter GDP growth 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>
(Reporting by Mirka Krufova; Editing by Michael Winfrey)
