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PRAGUE, June 1 (Reuters) - The Purchasing Managers' Index
(PMI) for Czech manufacturing inched up to a seven-month high in
May but remained below the critical 50 mark, indicating an 11th
straight month of decline, data showed on Monday.
Analysts said the data, along with worse-than-expected
output and growth figures released at the end of May, showed the
Czech economy was still in the grip of recession. They said a
recovery would not begin at least until autumn and the Czech
central bank could loosen monetary policy as soon as this month.
PMI inched up to 40.5, from 38.6 in April and a record low
in January. It was the fourth rise in the last year and near
levels recorded prior to the near-collapse of global financial
markets in the final quarter of 2008, Markit Economics said.
Output also ticked up to 41.9, from 39.0 the previous month.
Markit said seasonally adjusted new orders remained below
the no-change mark of 50.0 in May, signalling a further decline
in incoming new work in the manufacturing sector.
However, the overall rate of decline eased for the fourth
month running from January lows.
Labour market conditions in manufacturing remained very weak
in May. The employment index signalled a rapid rate of job
shedding as firms adjusted capacity lower and cut costs. But the
index was at its highest level in 2009, indicating a slightly
slower pace of workforce contraction, Markit said.
The Czech crown eased slightly to 26.79, from 26.71 before
the data's release, but was still stronger on the session as a
whole, following a regional trend.
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KEY POINTS:
05/09 04/09 05/08
Purchasing Managers' Index 40.5 38.6 51.8
Output 41.9 39.0 52.6
(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 eased slightly to 26.79, from 26.71 before
the data's release, but was still stronger on the session as a
whole, following a regional trend.
COMMENTARY:
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"It corresponds to what we saw on Friday in the preliminary
industrial output data."
"The steepest drop is unlikely to repeat but an improvement
is still far ahead of us."
"A recession is continuing but similarly to the global
economy, it is not a free fall like in the beginning of the
year. It is only a moderation of the recession."
"A recovery will come some time around the turn of this and
the next year."
RAFFAELA TENCONI, CHIEF ECONOMIST, WOOD & CO.
"It's a positive sign that there's stabilisation... The fact
that they're up simply follows what we're seeing in the euro
zone. But it doesn't really change my view that Q2 GDP is likely
to remain extremely weak."
"What we're seeing is the expectations are improving
significantly but the actual current conditions are not. In fact
in some countries they are deteriorating. So I would expect Q2
GDP to remain extremely weak. The bulk of the recovery starts in
late Q3."
"In terms of rates, more than the PMI, the industrial
production number that came out last week... was weak, so
definitely another 25 basis point cut already this month and
another one a couple of months after that."
LARS CHRISTENSEN, EMEA ANALYST, DANSKE BANK
"It's still too early to talk about recovery... It is still
a very low level. The moderate improvement is more or less as
expected and is basically a European, global trend."
"The downturn is beginning to see a bottom... but the levels
on Czech PMI are still very, very low (compared to) other places
in Europe."
"We'll continue to see an improvement for the rest of the
year but it'll probably be a moderate improvement."
"I think we need to go to 2010 (to reach the 50 point
level)."
PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT PRAGUE
"It confirms the worst is over for Czech manufacturing. That
said, the increment rise in May was less than two points, so
smaller than in previous months."
"It means the recession in manufacturing has been slowing
but not receding."
TREVOR BALCHIN, ECONOMIST AT MARKIT
"The latest batch of PMI data provide encouraging news
following the worse-than-expected Q1 GDP figures. The signs are
that industry has turned a corner and we will see a softer fall
in output in Q2, a view underlined by the new orders, backlogs
and finished goods stocks variables."
"Further rate cuts were mooted following the GDP data, but
this release raises the likelihood that the current level of 1.5
percent represents the bottom of the cycle."
BACKGROUND:
- Report on last Czech c.bank rate decision.......[]
[] [] [] []
- March foreign trade figures.....................[]
- April industrial output.........................[]
[]
- First-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>
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With immediate effect detailed PMI data are only available
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(Reporting by Mirka Krufova; Editing by Michael Winfrey)
