* Polish August PMI rises to 48.2, from 46.5 in July
* Czech PMI up to 47.1, from 43.5
* Hungarian PMI, different method, falls to 45.8 from 49.2
* Analysts say euro zone still key to E.Europe recovery
By Michael Winfrey
PRAGUE, Sept 1 (Reuters) - Manufacturing in Poland and the
Czech Republic crept to the brink of break-even in August,
surveys showed on Tuesday, indicating the sector may soon return
to growth in the export-heavy region.
But the data from the European Union's largest eastern
members were blunted by a reversal in regional straggler
Hungary, where industrial sentiment broke from its gradual
improving trend to steepen its decline last month.
The region is trying to claw its way back to normalcy
following the crisis-sparked collapse in western European demand
for their vehicles and electronics, helped in part by car scrap
subsidies in Western Europe and re-emerging consumer spending.
Markit's Composite Purchasing Managers Index (PMI)
<PLPMI=ECI> for Poland rose to a 15-month high of 48.2 points in
August, better than both the 46.5 level in July and the 47.0
forecast in a Reuters poll.
In the Czech Republic, PMI rose to 47.1 from 43.5 in July.
The overall figures for both countries stayed below the
neutral 50 mark that marks the border between expansion and
contraction but still garnered positive comments from analysts,
who said industrial production figures may soon follow.
In both Poland the Czech Republic, the industrial component
of PMI, the backbone of the export-heavy region, cleared the 50
point hurdle for the first time since last year, rising to 51.8
and 51.5 respectively.
Economists were quick to point, however, to Hungary's data
which, although compiled under different methodology and not
directly comparable, underscored the fragility of a rebound.
"The improvements in the Czech Republic and Poland are
impressive in our view," said Zsolt Papp, chief economist
emerging European equities at KBC Financial Products.
"(But) the fall-back in Hungary's PMI in August serves as a
good warning not to extrapolate a few months' trend."
Hungary's PMI fell to 45.8 in August, from 49.2 in July,
with output falling 7.2 points to 44.3.
The Czech crown slipped a quarter of a percent despite the
improvement in the index. Hungary's forint shed 0.6 percent and
the Polish zloty was down just 0.1 percent.
EURO ZONE STILL KEY
PMI, designed as a forward-looking indicator of sentiment,
has differed widely from hard industrial data in recent months.
Despite consistent improvements in PMI, Czech industrial
output showed a higher-than-expected 18.4 percent year-on-year
drop for July, with new orders falling by 22.7 percent.
Poland, the only country in the region expected to avoid a
contraction during the crisis because of its much lower reliance
on exports and domestic market of 38 million people, saw its
production fall too, albeit only by 4.6 percent.
Many analysts said they would look forward at the PMI data
now, as it appeared to be tracking the region's main market, the
euro zone, where PMI rose three points to 50 in August.
"PMI in the Czech Republic, and Poland as well, are both
improving. It may be misleading to look at the latest industrial
figures, which worsened," said David Marek, chief economist at
Patria Finance in Prague.
"It is in line with developments in western Europe and the
global economy."
A nagging concern that remains is unemployment, which
continues to deteriorate. The Czech PMI data showed
manufacturers continued to cut jobs in August, with over a
quarter of companies reporting reduced workforces.
And while car scrap subsidies in the euro zone have boosted
output, economists said those schemes were eating into future
demand, and benefits from the subsidies were likely to drop off
at the year end when they finish.
Neil Shearing of Capital Economics, said inventory
restocking was another main driver but it too was temporary and
could not sustain a long-term recovery unless euro zone
consumers open their wallets in a more pre-crisis fashion.
"Without a lasting recovery in Western Europe -- and Germany
in particular -- the prospects for industry are pretty bleak,"
Shearing said.
(Reporting by Reuters bureaus; Editing by Andy Bruce)
