(Adds Hungarian PMI, Romanian GDP)
By Michael Winfrey
PRAGUE, Sept 1 (Reuters) - Czech and Polish manufacturing
suffered the sharpest fall in more than five years in August,
hit by a steep drop in Western demand and strong currencies,
while Romania's economy posted a strong second quarter.
Analyst saw the data having different policy implications
across the region, including a possible rate cut for the Czechs,
stable borrowing costs for the Poles, and a hike in Romania,
where economists warned of overheating.
The Czech Purchasing Managers' Index (PMI) dropped to 47.3
in August, the lowest level since the series began in July 2001,
falling further below the 50 divide between growth and
contraction from 49.9 in July, data from Markit Economics and
ABN Amro showed on Monday.
In Poland, the largest ex-communist state to join the
European Union, the contraction was sharper, to an index level
of 45.8 in August from 46.4 in July, its sixth consecutive
monthly decline and the worst figure since December 2002.
It came alongside PMI data from the euro zone -- emerging
Europe's main export market -- that was a touch better than
expected but still showed a significant contraction at 47.6.
"There have been signs of easing growth momentum across most
economies in eastern Europe, including Poland, notwithstanding
its healthy domestic demand momentum," said Roderick Ngotho, a
foreign exchange strategist at UBS.
Separate data using different methodology showed Hungary's
seasonally-adjusted PMI rose to 52.1, from 51.7 in July.
And Romania's gross domestic product (GDP) grew 9.3 percent
year-on-year in the second quarter, its fastest rate in almost
four years. It beat analysts' expectations and first quarter
growth of 8.2 percent but analysts added a note of concern.
"The Romanian economy is overheating," said Capital
Economics analyst Neil Shearing.
"Higher domestic interest rates, weaker demand from the
euro-zone and tougher external financing conditions are likely
to weigh on the economy over the course of 2009."
INTEREST RATES
Polish central bank hawks were encouraged by data on Friday
showing faster-than-expected growth of 5.8 percent in the second
quarter, only a touch slower than the previous three months.
Last week the bank's dovish chief said it "clearly" remained in
tightening mode, after leaving rates on hold at 6.0 percent.
The Czech economy, which has seen a sharp slowdown in
consumer spending and is more dependent on export demand from
Germany, slowed to grow 4.5 percent in the second quarter, from
5.1 percent in the first three months of the year.
That slowdown, exacerbated by record highs on the crown that
have made Czech exports less attractive to west Europeans,
helped prompt the Czech central bank to surprise markets with an
interest rate cut to 3.5 percent last month.
Analysts said the PMI figures indicated the Poles could now
likely keep interest rates on hold until the end of the year,
while the Czechs could potentially cut again.
That feeling could be reinforced by weaker inflationary
pressure on firms' costs. They hit a 15-month low for Czech
manufacturers and an eight-month low of 56.0 in Poland.
"This just reinforces our view that there are downside risks
even to the (Czech central bank's) new growth projections and
further monetary loosening is likely in the near term," said
Raffaella Tenconi, an economist at Dresdner Kleinwort.
Debbie Orgill, from ABN Amro, said: "For Poland the interest
rate tightening cycle is coming close to an end, but rate cuts
really are only a story for spring 2009 onwards."
The Czechs were also hit by the first decline in new orders
in almost six years to a record index low of 45.0. For the
Poles, the new export orders gauge rose to 44.0, from 42.6 in
July, still representing a sharp contraction, and the output
index fell to a 68-month low of 43.9.
(Editing by Ruth Pitchford)
