* Czech July PMI slips to 56.8, from 57.6
* Polish PMI eases to 52.1, from 53.3
* Hungarian PMI, different methodology, jumps to 53.5
By Michael Winfrey
PRAGUE, Aug 2 (Reuters) - Polish and Czech industry slowed
their expansion in July more sharply than analysts had expected,
failing to get as much of an export boost as stronger data from
the neighbouring euro zone had suggested.
Strong demand in Germany for emerging European exports and
relatively weak levels on the Polish zloty and Czech crown have
driven output from emerging European Union economies in recent
months.<EURPLN=><EURCZK=>
But strong inflows of investor capital into the region
pushed the crown and zloty higher against the euro in late July,
slowing the pace of new orders, and economists said it could be
the first indication of expected softer growth at the year-end.
The Czech Purchasing Managers' Index (PMI) <CZPMI=ECI>
slipped to a four-month low of 56.8 in July from 57.6 in June,
data from Markit Economics showed on Monday. The Polish PMI
<PLPMI=ECI> eased to 52.1 points, from a nearly three-year high
of 53.3 in June and well below a Reuters poll forecast of 53.2.
Both countries stayed firmly above the 50 point level that
marks the barrier between expansion and contraction.
Daniel Hewitt, an economist at Barclays Capital, said the
main surprise for the Czech data was a 5 point drop in new
export orders.
"You can't raise a red flag yet, but you certainly are
forced to look very carefully for the next couple of months," he
said. "For Poland, that's a bit of a blow, going down as they
did from 53.3, which is not that strong ... They're still in
positive territory, but it's not the direction we were looking
for."
Many economists expect growth to slow across the region at
the year-end, as businesses complete inventory restocking and as
governments across Europe cut costs to rein in swollen budget
deficits and public debt.
Hungary's PMI <HUPMI=ECI>, compiled under different
methodology, rose to 53.5 in July from a revised 49.6 in June.
CURRENCIES, SOFTER GROWTH
Exports have driven the Czech economy out of recession this
year, but domestic demand remains sluggish. The Finance Ministry
has forecast the economy to grow 1.6 percent this year.
Poland, the only EU state to avoid contraction last year, is
expected to grow by 3.5 percent.
Monday's data were hard to square with recent positive
numbers out of the euro zone, emerging Europe's biggest export
market. The German PMI soared on the back of a jump in new
orders to 61.2 in July. []
But, buoyed by a flood of capital into riskier emerging
markets, the Czech crown has soared to a 20-month high of 24.75
against the euro, a level that could begin to drive up prices of
goods that play a major role in the euro zone manufacturing
supply chain.
The zloty is at a two month high, although analysts say it
has a bigger cushion, as it is still 19.5 percent weaker than
its record high hit before the global economic crisis in 2008.
Economists said Poland and the Czech Republic were still on
a strong footing, and even if growth were to slow at the end of
the year, the countries would not slip towards recession.
"We need to remember that the sentiment in Germany is
positive... which means that Poland will continue to export to
Germany and the zloty exchange rate against the euro is still
favourable," said Piotr Bielski, senior economist at Polish
Zachodni WBK bank.
(Editing by Ruth Pitchford)
