* Polish March PMI edges up to 42.2 []
* Czech March PMI ticks up to 34.0 []
* Hungary PMI calculated by different method slips to 39.5
[]
* Analysts say far too early for optimism
By Michael Winfrey
PRAGUE, April 1 (Reuters) - Manufacturing in two of central
Europe's most robust economies, Poland and the Czech Republic,
slowed its rate of contraction in March but still suffered a
steep drop, indicating economic decline was still in full swing.
A collapse in demand in the euro zone has hit the European
Union's eastern members, hammering economic growth, prompting a
selloff in the region's assets and causing tens of thousands of
job cuts.
The Czech Purchasing Managers' Index (PMI) inched up to 34.0
in March from 32.6 in February and a record low set in January,
Markit Economics and ABN Amro said. In Poland, the index rose to
42.2 points, the highest in five months, from 40.8 in February.
Any figure below 50 on the PMIs, which are based on surveys
of manufacturing companies, marks a decline in industry.
Analysts viewed the figures with caution and said what appeared
to be stabilising sentiment may not actually correspond with the
real economic situation.
Roderick Ngotho, a strategist at UBS, pointed to German PMI
data also released on Wednesday, which he said did not reflect a
collapse in Germany factory orders and it was possible sentiment
was "adapting to bad news".
"Hence though still quite poor, it could be looking for a
base in the poor side of the scale. This is different from
sentiment being outright optimistic due to a positive change in
global macro indicators," he said.
"Without global demand picking up and with domestic demand
generally weak, it is difficult to envisage a positive
environment for industrial orders/output to pick up meaningfully
in the near term."
The Polish industry decline showed deceleration for the
third month in a row and was the least extreme since November.
The Czech decline was also the least extreme in five months,
but the first quarter as a whole still pointed to a much steeper
rate of decline than the second half of 2008, said Markit, which
compiles the PMIs.
It said both new orders overall and new export orders
continued to contract rapidly, reflecting weakening demand from
western Europe, while employment fell to a new record low for
the fastest rate of decline since the survey began in July 2001.
Hungary's PMI, which is calculated under different
methodology from the Markit data, slipped in March to 39.5 from
39.7 a month earlier.
CAR SUBSIDIES
Emerging EU currencies, tracking an uptick in increased
global risk appetite, were not affected. The manufacturing
decline, and market expectations that it will persist and bleed
into the wider economy, has caused steep losses across the
region.
Officials have repeatedly cut growth forecasts and a growing
number of economists say all economies, even the region's
biggest, Poland, are likely to face recession this year.
The Polish zloty <EURPLN=> has been the biggest loser since
peaks last summer, dropping almost a third against the euro.
Hungary's forint is second worst, having lost 26 percent, and
market watchers say a protracted recession could deepen losses.
Analysts said the slower industrial decline in March could
be linked to effects of a car-scrapping subsidy introduced in
around 10 EU countries in January in which governments pay
buyers of new cars a chunk of the price when they hand in their
old vehicles, to support the industry.
Carmakers are the main drivers of economies such as the
Czech Republic and Slovakia, where top global manufacturers have
set up factories this decade. Those countries have seen sharp
industry declines ease in recent weeks.
Some firms, including Volkswagen <VOWG.DE> unit Skoda, have
hired some new workers and resumed full work weeks to tackle a
surge in orders, but industry experts say they expect the
subsidy effect to last only for several months.
Analysts said the downturn still had room to run.
"It's far too soon to give a green light to recovery," said
Neil Shearing from Capital Economics.
"The precondition to recovery is a pickup in demand from the
euro zone, really -- a sustainable improvement of those
conditions, and I think we're still a good ways from that."
(Reporting by Michael Winfrey; editing by David Stamp)
