* What: Industrial output flash estimate
* When: Due by Sept. 3
* Median forecast sees 14.5 percent y/y drop
By Mirka Krufova and Jana Mlcochova
PRAGUE, Aug 26 (Reuters) - The annual decline in Czech
industrial output in July was, like in June, less severe than
early in the year thanks to a small pick up in foreign demand, a
Reuters poll showed on Wednesday.
A global economic crisis has hit the small and open economy
mainly through a lack of demand from the West for its industrial
products, such as Skoda cars, electronics, and steel products.
A record economic growth from past years turned into a
record contraction, with a 4.9 percent plunge in gross domestic
product in the second quarter.
Sixteen economists polled by Reuters between Aug 24 and Aug
26 produced a median forecast for a 14.5 percent annual drop in
July output, with the most pessimistic forecasting a 17 percent
fall and the most optimistic -- 10 percent.
The July fall would be the ninth annual double digit decline
in a row.
But output was seen rising in July from June, the third
month on month growth since September, after production grew
from February to March and from May to June.
Analysts said a pick up in industrial orders in Germany, the
main trading partner, was key for the improvement, along with
expectations that the data would track the more optimistic
confidence indicators.
German manufacturing orders rose 4.5 percent in June from
July, their fastest increase in two years. Czech July Purchasing
Managers Index, a broad gauge of business activity, rose to 43.5
points, a 10-month high.
"Surveys such as PMI both in the euro zone and the central
European region... indicate that sentiment in industry has been
improving and Czech industrial output should therefore further
decelerate pace of its annual contraction in the third quarter,"
said Radomir Jac, a chief economist at Generali PPF Asset
Management.
One less working day from last year's July had a
negative effect on the July reading, analysts said.
A scrap subsidy in Germany, a payment for removing old cars
and purchasing new ones, valid as of February and scheduled to
wind up in September, was responsible for the recent improvement
in Czech output.
"A question is how serious will be for Czech economy the end
of car scrapping subsidies in Germany," Jac said, but he said
sentiment indicators pointing to improvement in demand was good
news for production.
"Our main concern is about sustainability of recovery.
Still, outlook has improved amid signs of recovery in
Germany...thus we can assume that the coming months we should
witness further revival...," said Piotr Matys, an economist at
4Cast.
The Czech statistics bureau is expected to release a flash
estimate for the July reading Sept. 3.
(Reporting by Jana Mlcochova)
