PRAGUE, Oct 1 (Reuters) - The Czech Purchasing Managers'
Index (PMI) dropped to 46.5 in September, from 47.3 in August,
falling below the critical 50.0 mark for the third consecutive
month, Markit Economics and ABN Amro said on Wednesday.
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KEY POINTS:
09/08 08/08 09/07
Purchasing Managers' Index 46.5 47.3 55.8
Output 46.9 45.7 57.3
New orders 42.8 45.0 57.6
(Full table of data.............................[])
- A figure above 50 indicates expansion on the previous month
while a number below 50 signals contraction.
- The composite indicator, designed to provide a
single-figure snapshot of manufacturing performance, was 46.5 in
September, the lowest level in the survey's 87-month history.
- The headline index has signalled contraction of the sector
throughout the third quarter. The PMI has not previously been
below 50.0 for three months running.
- Production in the Czech Republic fell for the third month
running in September. Output was 46.9, indicating a marked rate
of decline, albeit slightly weaker than in the previous month.
- New orders received by Czech manufacturers declined for
the second successive month in September. Moreover, the new
orders fell to a new low of 42.8, from 45.0, indicating a sharp
rate of contraction.
- Firms reported that business had declined as a result of
weak domestic demand and the global economic slowdown, the
effect of which was compounded by the strong crown.
- Weakening global demand led to a sharp fall in new export
business received by Czech manufacturers in September. New
export orders remained below the neutral level of 50.0 for the
third month in a row and, falling to 42.4, indicated the
sharpest rate of decline in the survey's history.
- A number of firms blamed the strong currency for weaker
exports. There was also mention of worsening euro zone demand.
- Inflationary pressure on firms' costs eased sharply in
September. At 52.1, the input prices indicated the weakest rise
in input costs since February 2006. The index has fallen by
twelve points over the past two months, unprecedented in the
series history.
- Metals and paper were reported to have fallen in price,
but oil-related commodities and energy costs continued to rise.
- Lower output and falling demand led Czech manufacturers to
cut staffing levels in September to cut costs. The latest round
of job shedding in the sector was the fourth in five months.
- The employment index eased to 47.3, from 47.9 the previous
month, indicating the fastest decline in the manufacturing
workforce since August 2003.
- The survey highlighted a substantial easing in
inflationary pressure on manufacturers' costs in September.
Though data signalled that input prices had risen on average,
the rate of increase was the weakest since February 2006.
- Over the past two months, input inflation has eased more
than in any comparable period over the survey history.
- A combination of deteriorating market conditions and
reduced inflationary pressure led to only a modest rise in
manufacturers' charges in September. Output price inflation
weakened for the third straight month to its lowest since
November 2006.
COMMENTARY:
NEIL SHEARING, EMERGING EUROPE ECONOMIST, CAPITAL ECONOMICS
"It's a sign of weaker external demand. The correlation
between PMI and industrial production in the Czech Republic
isn't great."
"Nonetheless, at those levels it's poised for an outright
contraction in industrial production growth. It's all looking
grim and I think as the euro zone slows things are not pointing
to a quick rebound."
AGATA URBANKSA, EMERGING EUROPE ANALYST, ING
"The (weak) numbers are in line with what is happening
globally... We're still entering a period of negative
development."
"That will be the story of the first and possibly also the
second half of 2009."
RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MANAGEMENT
"The numbers are very poor... Economic activity is on a
descending path."
"The September numbers are copying the trend in the euro
zone and point to a worsening outlook for Czech production."
DOMINIC WHITE, GLOBAL ECONOMIST, ABN AMRO, LONDON
"The results of the survey support the dovish bias to
Czech National Bank policy, as prospects for growth are fading
with softer orders data, while costs are also declining."
"Weaker demand for labour also points to an ease in pressure
on wages, again corroborating the outlook of lower inflation
ahead. November is the next opportunity for lower interest
rates, and will coincide with the publication of the next
central bank Inflation Report."
BACKGROUND:
- Report on last Czech c.bank rate decision []
[] []
- July foreign trade figures.......................[]
- July industrial output.........................[]
- Second-quarter GDP growth data................. []
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- Czech forward money market rates <CZKFRA>
(Reporting by Mirka Krufova; Editing by Michael Winfrey)
