By Michael Winfrey
PRAGUE, May 9 (Reuters) - Industrial output in eastern
Europe slowed sharply in March, partly due to lower demand from
the euro zone, but analysts said Easter holidays were the main
reason and stayed optimistic ahead of next week's quarterly
growth data.
In Slovakia, the region's growth leader, output slammed on
the brakes to grow just 1.8 percent, data showed on Friday.
Output growth was 12.5 percent in February, and the sharp
slowdown was mirrored in Hungary, Romania and Poland.
The Slovak drop off was mainly due to a huge drop off in car
manufacturing -- the country of 5.4 million people is the
world's top auto producer per capita -- which plummeted to just
4.7 percent growth, versus a spike of 31.0 percent in February.
The developing, open economies are sensitive to demand for
their goods from the euro zone, and the region is now feeling
the ripples of the U.S.-led global slowdown.
But, although the data were adjusted for working days,
analysts said the output figure was still mainly affected by
holidays for Easter, which fell earlier than usual this year,
and added such significant falls should not be repeated in the
near future.
"Industrial production is a rather volatile series, thus the
sharp fall in March does not necessarily mean the end of strong
(Slovak) growth," said Piotr Matys, a 4Cast analyst in London.
The data precedes preliminary first quarter economic growth
data from Slovakia, the Czech Republic and regional laggard
Hungary due out on May 15.
Romanian March output was up 6.7 percent on the month, but
its annual figure also slowed to just 2.9 percent, from 7.7 in
February. It was largely affected by a drop in energy production
of 2.9 percent and a fast deceleration in manufacturing.
Polish output figures released in April also came in very
low at 0.9 percent, significantly below the 8 percent forecast,
while the Czechs' industrial output, due out on Monday, is
expected to drop to 4.8 percent, from 11.3 percent in February.
GRADUAL SOFTENING
Raffaella Tenconi, an economist at Dresdner Kleinwort, said
lower demand from the euro zone -- the destination for most of
the region's exports -- is having an impact.
But she and other analysts agreed the holiday effect had had
the greatest impact and the output drop would not drastically
hit first quarter Czech, Slovak and Hungarian growth data
expected on May 15.
"There is a slowdown. If you look across the region,
business confidence is deteriorating, orders are down. But at
this stage, you're looking at a gradual softening," she said.
"There is no evidence of a sharp slowdown the way the
industrial production numbers would indicate."
Hungary is expected to show first quarter growth of an
annual 1.25 percent on Thursday, according to a Reuters poll,
creeping up from 0.8 percent the previous quarter.
The Czechs are seen slowing to 5.7 percent, from 6.6
percent, and analysts expect the regional growth leading Slovaks
to have dropped significantly from a better-than-expected 14.3
percent spike in the last quarter of 2007.
Tenconi added the slowdown had made central banks look more
closely at growth than inflation, giving rise to potential risks
as price growth -- fuelled by oil and food as well as wage hike
demands and rampant domestic consumption -- remained a threat.
"The March numbers have made central banks more cautious,
which in my view may be a bit of a risk," Tenconi said.
(Additional reporting by Peter Laca in Bratislava; Editing by
Gerrard Raven)
