* Trade data point to economic weakness
* Pockets of price pressure lurk in eastern Europe
By Justyna Pawlak
BUCHAREST, July 10 (Reuters) - Romanian and Slovak trade
figures for May on Friday showed both eastern European countries
struggling under the weight of the global crisis which is
hitting the main drivers of their economies.
Separately, inflation data from both attested to weak
inflation, although some pockets of price pressures were lurking
despite recession.
This latest batch of economic readings signalled eastern
Europe remains in the clutches of economic woes which have
undercut demand for local production from western Europe and
stamped out consumption in demand-driven states such as Romania.
In Romania, the trade deficit plunged by 60 percent on the
year in the first five months of the year to 3.6 billion euros
($5 billion), as exports fell 21 by percent and imports shrank
by 36.5 percent.
Slovakia's trade figures showed a higher-than-expected
surplus of 94.8 million euro in May, compared with a revised
385.4 million euro surplus in April, but signalled exports
falling faster than imports, wiping out the key area of support
for the manufacturing-based economy.
"The fact that the pace of import slowdown (in Romania)
exceeds the pace of the exports' fall is good news," said
Catalin Maciuca from MKB Romexterra Bank in Bucharest.
"But the sharp fall of imports will be reflected in ... an
underperformance of the economy in the second quarter."
Analysts say Romania is showing signs of stabilising after
sliding into recession earlier in the year, with this week's
release of June industrial output figures showing a monthly
decline of 0.3 percent.
Some said that despite a steep fall in the manufacturing
sector, Romania was outperforming other regional economies,
largely thanks to continued production of the low-cost Dacia
cars by Renault <RENA.PA> in the south of the country.
"This development was favoured by the car scrap scheme in
Germany and other places. Yet, once those schemes are over, the
industrial sector might suffer once again in line with the
region," according to an ING research note.
Earlier this year, Dacia boosted production, despite a
slowdown in car demand throughout Europe, because a
multi-billion-euro German aid package to subsidise the car
industry attracted demand for its relatively cheap cars.
The fall in exports in euro zone member Slovenia eased in
May, but even there analysts said no recovery was in sight.
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"It was expected that a free fall will stop at some point
but we cannot be sure that this is the bottom yet," Igor Masten
of the Ljubljana's Faculty of Economy told Reuters, adding
Slovenia's recovery will follow a recovery in Germany which is
its main trading partner.
DIFFERENT COSTS
The Romanian inflation figures, showing annual price growth
down to 5.9 percent in June from 6 percent a month earlier,
cemented expectations for further monetary easing. Most analysts
said another cut would come as early as August.
The June data underlined waning demand pressures but some
analysts said there were lingering concerns over the impact of a
weak leu currency <EURRON=> and an expected weak harvest.
That said, the data did little to change the outcome of this
month's Reuters survey of economists that showed the market
expecting a 50 basis point cut borrowing costs in August to 8.50
percent.
"We believe inflation will stabilise around these levels for
the rest of the year," said Lars Christensen from Danske Bank in
Copenhagen.
"With economic activity continuing to decline there is not
much inflationary pressure and this could keep the door open for
further moderate monetary easing."
In Slovakia, June annual inflation figure showed the first
increase since September, rising to 2.4 percent up from 2.2
percent seen in May. But analysts said the pick up was driven by
property management prices and did not spell out a break in the
downtrend.
In a separate release, Hungary said farm prices fell by an
annual 21.7 percent in May after a 19.9 percent decline in
April.
(Reporting by Reuters bureaus; editing by Toby Chopra)
