INSTANT VIEW 2-Czech May PMI highest since Aug 2007, pace slows

                                
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 PRAGUE, June 1 (Reuters) - The Czech Purchasing Managers'
Index (PMI) edged up to its highest level since August 2007 to
hit 57.6 in May, up from 57.3 in April, Markit Economics data
showed on Tuesday.
                                
 The overall rise was the smallest in five months, with a
gain in the employment component of the index compensating for
the first dip in seven months in output.
                                
 The new order component edged down but stayed well above 50,
the line dividing growth from contraction.
                                
 The data showed new orders were driven by both export and
domestic demand, with key European markets including Germany,
Slovakia and Scandinavia.
                                
 
 ****************************************************************
KEY POINTS:                       05/10      04/10     05/09
Purchasing Managers' Index        57.6       57.3       40.5
Output                            58.5       60.5       41.9

(For table, double click on......................[ID:nPRA005087]
- A figure above 50 indicates expansion on the previous month
while a number below 50 signals contraction.
 
                                
 MARKET REACTION:
                                
 The crown <EURCZK=> firmed a touch to 25.55 per euro from
25.61.
                                
 
                                
 COMMENTARY:
                                
 MICHAL BROZKA, ANALYST, RAIFFEISENBANK
                                
 "There is improvement in the industrial sector. So far, we
can still expect improvement in manufacturing. 
                                
 "For the second half of the year there can be some slowing
in growth. This is dependent on the outlook for the euro zone,
which is similar for the second half."
                                
 
                                
 PAVEL SOBISEK, CHIEF ECONOMIST, UNITCREDIT, PRAGUE
                                
 "We can see that Czech industry has continued to rise in
May, and has done so more dynamically, which is in slight
contrast with big economies, at least with those that have
already released the May PMI. Again it confirms that the Czech
economy is probably slightly lagging behind Western Europe in
its cycle."
                                
 "Positive as the figure is, it is inevitable that the
dynamics slow down in the course of the next month as has been
the case in the west."
                                
 
                                
 KUBILAY OZTURK, ECONOMIST FOR EMERGING EUROPE AT HSBC
                                
 "The upbeat trend in the Czech manufacturing sector appears
to have remained intact in May. Despite decelerating slightly,
output, new and export orders all continued to expand at levels
faster than their respective long-term trends. Both external and
domestic demand conditions remained favourable with the ratio of
new orders to outstanding finished goods reaching its highest
level since June 2001.
                                
 "Employment improved encouragingly further, in line with the
sooner-than-expected improvement in unemployment at the national
level, which bodes well for private consumption during the rest
of the year. However, the recent drop in confidence indicators
underlines the limited upside potential.
                                
 "Input prices surged further in May and reached
survey-record levels, on the back of higher global commodity
prices and a weaker crown in the month; output prices also
increased, albeit only modestly, for the first time since
September 2008, pointing to more pronounced inflationary
pressures ahead, and hence the lack of need for further easing.
                                
 "Going forward, the notable decline in May EMU PMIs and a
slight negative surprise in German business climate suggest that
the ongoing upward momentum is unlikely to remain unscathed."
                                
 
BACKGROUND:
- Report on last Czech c.bank rate decision......[ID:nLDE6441E9]
 [ID:nPRG004103] [ID:nPRC003373] [ID:nPRG004104] [ID:nLDE64513P]
- March foreign trade figures....................[ID:nLDE646054]
- March industrial output........................[ID:nLDE646054]
- First-quarter preliminary GDP data.............[ID:nLDE64B0AH]

LINKS: 
- For LIVE Czech economic data releases, click on       <ECONCZ>
- Instant Views on other Czech data                 [CZ/INSTANT]
- Overview of Czech macroeconomic indicators            [CZ/ECI]
- Key data releases in central Europe    [CEE-CONVERGENCE-WATCH]
- 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>

                                
 ** Index copyright and database rights owned by Markit:
unlicensed copying strictly prohibited ** 
                                
 Detailed PMI data are only available under licence from
Markit and customers need to apply to Markit for a licence. For
further information please phone Markit on ++ 44 20 7260 2454.
 (Reporting by Mirka Krufova and Jason Hovet; editing by John
Stonestreet)