* Strong exports underpin recovery
* Hungary shows big surplus, Czech imports high on machinery
* German orders help, but eyes still on slowdown
* Czech data [], Hungarian data []
By Jan Lopatka
PRAGUE, Oct 7 (Reuters) - German demand helped buoy economic
recovery in Hungary and the Czech Republic in August, data
showed on Thursday, enabling them to ride out austerity measures
that have slowed activity in some euro zone countries.
Both countries recorded strong growth in exports -- 35 and
23 percent year-on-year respectively -- showing the highly
trade-dependent countries were benefiting from orders in the
biggest European Union economy.
Their output has risen strongly in recent months, but growth
is still hampered by weak domestic demand, especially in Hungary
where fiscal austerity and pressure from large foreign loans cut
into household incomes.
Czech data also showed a much stronger than expected growth
in industrial output, a day after Hungary reported the highest
output growth in a decade, and a mild rise in retail sales that
indicated household demand would also contribute to growth.
The positive Czech and Hungarian data followed a surprise
3.4 percent rise in German August manufacturing orders that
improved the outlook for a euro zone recovery clouded by Irish
banking and budget problems and austerity-hampered growth in the
bloc's periphery.
"The data ... are fitting into a picture of still solid
performance of industrial output in core euro zone countries,
particularly in Germany, which is having positive consequences
for activity also in Central Europe," said Radomir Jac, chief
analyst at Generali PPF Asset management.
"Yes, growth of overall activity in the second half of this
year will be slower than what was seen this spring, but the data
are still far from any gloomy picture."
Czech August manufacturing output showed a 12.9 percent
year-on-year rise, above expectations of 8 percent. The trade
surplus shrank to 0.54 billion crowns, but this was due to a 30
percent surge in imports, mainly of machinery.
This was a positive indicator for investment and consumption
growth, analysts said. Chief economist Pavel Sobisek of
UniCredit in Prague said the import jump may have been due
partly to soaring imports of equipment for the heavily
subsidised solar power industry.
Markets were little moved, and the region's currencies
weakened slightly as investors waited for new developments on
the austerity front.
HUNGARIAN EXPORTS JUMP
Hungary posted a much better than expected trade surplus in
August, the 35 percent spike in exports from a year earlier
outpacing import growth of 30.7 percent.
The surplus of 392 million euros beat analysts' median
forecast in a Reuters poll of 269.5 million euros.
Many analysts predict a slowing in manufacturing in
export-heavy emerging European countries, though this week's
data have given signs of hope that orders will continue to flow,
even if at a slower pace as belt-tightening measures in Europe
take hold.
"The surplus readings on the trade balance could begin to
drop, however, as demand in Hungary's main export markets begins
to subside (a result of fiscal austerity measures and a less
favorable inventory cycle in the euro zone)," said Gyorgy Barta,
an analyst at CIB.
"Although the most recent German industrial orders data and
Hungarian industrial output figures admittedly came out better
than expected, we see the ... weakening in the trend to begin
only in the fall months."
The Czech economy is expected to grow by 1.6 percent this
year and 2.3 percent in 2011, according to central bank
estimates. The Hungarian central bank expects 0.9 percent GDP
growth this year and 2.8 percent in 2011.
(Editing by Tim Pearce)
