INSTANT VIEW 2-Czech Sept PMI indicating near-stabilisation

                                
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 PRAGUE, Oct 1 (Reuters) - The Czech Purchasing Managers'
Index (PMI) was on the verge of the break-even point at the end
of the third quarter, with production and new orders rising for
a second month in a row, Markit Economics said on Thursday.
                                
 The main drags on overall recovery remained falling
employment and pre-production inventories, while cost pressures
increased for the first time in 12 months, Markit said. Backlogs
of work were only marginally lower. 
                                
 Overall manufacturing PMI inched up to 49.5 from 47.1 in
August, staying for the 15th straight month below the neutral 50
mark that marks the border between a rise and a fall.
                                
 Production rose for the second month running in September,
echoing similar performance in neighbouring Poland, the ninth
straight month of improvement from a December record low.
                                
 The latest PMI figure of 49.5 signalled the slowest rate of
decline since July 2008. The only two components to exert
negative influences on the headline figure were employment and
stocks of purchases.
                                
 The Czech economy shrank by 5.5 percent year on year in the
second quarter, but grew 0.1 percent from the previous three
months, according to an official estimate last month.
                                
 Preliminary data for August industrial output showed a much
lower-than-expected 8.1 percent year-on-year drop, new orders
fell by 13.8 percent.
                                
 The new export orders index edged above the no-change mark
of 50.0 for the first time in 15 months, indicating growth of
new export contracts. However, the latest figure was below the
long-run trend and signalled only a marginal rate of expansion.

****************************************************************
KEY POINTS:
                                
                               09/09      08/09      09/08
Purchasing Managers' Index        49.5       47.1       46.5
Output                            53.6       51.5       46.9
(For table, double click on......................[nPRA004785]
- A figure above 50 indicates expansion on the previous month
while a number below 50 signals contraction.

                                
 COMMENTARY:
                                
 JULIET SAMPSON, CHIEF ECONOMIST for EMERGING EUROPE at HSBC
                                
 ""A further rise in the composite PMI index in September
towards the key 50 level signals a fledgling recovery in the
manufacturing sector. The output index advanced for the second
consecutive month thanks to improving domestic and external
demand. Notably, new export orders turned positive for the first
time in over a year, reflecting improved conditions in Western
Europe, while a slower pace of inventory depletion points to
rising sales."
                                
 "Despite a sharp increase in input costs, output prices
continued to retreat, underlining the possibility of further
downside surprises in inflation, while continued weakness in
employment suggests a quick revival in economic activity is
unlikely."
 
                                
 JAROMIR SINDEL, CHIEF ECONOMIST, CITIBANK, PRAGUE
                                
 "We did expect it could attack the 50 point level... it is
another improvement coming from Asia, across the euro zone,
so... it is positive news and it's not so surprising."
                                
 "October, November will probably be negative with regards to
the automotive industry and we shall see how it's going to move
with this indicator."
                                
 "Overall we expect that the entire processing industry, due
to an end of the scrap subsidy, (will) cool and recovery in the
dynamics will slow down."
                                
 
 BACKGROUND:
- Report on last Czech c.bank rate decision.......[ID:nL0326900]
                                
                                              [ID:nPRA004776]
- July foreign trade figures......................[ID:nL7161509]
- July industrial output..........................[ID:nLS137302]
                                
                                 [ID:nB627742] [ID:nLS601474]
- August preliminary industrial output            [ID:nL1592837]
- Second-quarter GDP data........................ [ID:nL8380265]
                                
                                                [ID:n8181173]
 
 LINKS:
- For LIVE Czech economic data releases, click on       <ECONCZ>
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- 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>

                                
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unlicensed copying strictly prohibited ** 
                                
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 (Reporting by Mirka Krufova)