PRAGUE, Nov 3 (Reuters) - The Czech Purchasing Managers'
Index (PMI) dropped to 41.2 in October, from 46.5 in September,
falling below the critical 50.0 mark for the fourth consecutive
month, Markit Economics and ABN Amro said on Monday.
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KEY POINTS:
10/08 09/08 10/07
Purchasing Managers' Index 41.2 46.5 54.6
Output 40.3 46.9 57.2
New orders 36.2 42.8 54.2
(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, posted a
level below the no-change mark of 50.0 for the fourth successive
month in October.
- The headline index fell for an unprecedented seventh month
running to a new low of 41.2, indicating a marked rate of
contraction.
- Output fell by more than six points for the first time in
its history in October, to a new low of 40.3. That signalled
easily the fastest contraction of manufacturing production since
the survey began in July 2001. Output has fallen for four
successive months.
- New orders fell for the seventh month in a row in October,
to 36.1. That signalled the sharpest rate of decline in
manufacturing new business in the survey history.
- Those panellists that reported falls in new orders often
stated that the wider global economic crisis and a slump in
demand from the construction sector had been key factors.
- Firms also highlighted worsening demand for automobiles.
- The volume of incoming new business to Czech manufacturers
from export markets declined for the fourth consecutive month in
October. Moreover, at 38.2, down from 42.4 one month previously,
new export orders were at the lowest level since data were first
available in July 2001.
- In tandem with the weakening climate of demand, prices
fell in October. Input prices were down sharply, driven by the
knock-on effect of lower oil prices and a range of cheaper
metals.
- Average input costs fell at the fastest rate since July
2002. Moreover, falling input prices were passed on to customers
during the months as firms discounted in an attempt to revive
sales.
- Czech manufacturers lowered their output charges in
October for the first time since December 2005. The output
prices fell to a 40-month low of 47.5. According to the latest
anecdotal evidence, a combination of falling demand and lower
input costs has driven deflationary pressure.
- Employment fell sharply to 42.2, from 47.3, surpassing the
previous low of 42.8 in February 2003. Staffing levels have
declined on average by five times since May. The latest job
shedding was mainly linked by firms to lower output and sales.
- The October survey indicated tougher business conditions
in the Czech manufacturing economy than at any other time in the
survey's 88-month history. Output, new orders, backlogs,
purchasing activity and employment all fell at record rates.
COMMENTARY:
IVAILO VESSELINOV, EMERGING MARKETS ANALYST, DRESDNER
KLEINWORT
"It's very much in line with expectations in terms of trend
and direction.
"The Czech numbers in particular show a high exposure of the
economy to Germany and the euro zone. Poland is more insulated
but is showing the impact of the slowing demand in the euro
zone."
"The latest data shows the sort of negative trend we expect
for the next few months... We expect a recession in the euro
zone next year, and significant slowdown but not outright
recession yet in the CEE4."
JAROMIR SINDEL, ANALYST, CITIBANK
"The data continues in a negative tone."
"The combination shows relaxing of price pressures... so it
is positive for the inflation target and it unties the Czech
central bank's hands to cut rates now on Thursday."
"For the crown, it represents negative momentum but there is
at the same time the question of the impact of the overall
interest rate differential between the Czech and the euro zone
interest rates."
"It is expected that the ECB will cut rates significantly,
so from that point of view the impact on the crown remains
unclear."
DOMINIC WHITE, GLOBAL ECONOMIST, ABN AMRO, LONDON
"The breadth and extent of the PMI's decline is extremely
worrisome, but lower price pressures do create scope for the
National Bank to respond quickly with lower interest rates."
"Monetary conditions are currently tight, and the Bank will
be concerned that the Koruna's recent recovery will exacerbate
the slowdown in activity."
BACKGROUND:
- Report on last Czech c.bank rate decision []
[] []
- August foreign trade figures....................[]
[]
- August 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)
