* Polish, Czech PMIs plunge
* Analysts see rate cuts on the cards
* Hungary at all-time low of 44.7 points, down 5.2 points.
By Jan Lopatka
PRAGUE, Nov 3 (Reuters) - The recession in Western economies
pushed business sentiment to all-time lows last month in central
Europe, a region where growth has slammed on the brakes as
demand for its exports dries up.
Growth across the region, especially in the Czech Republic,
Slovakia and Hungary, has been driven by exports to Germany and
other euro zone countries, which have begun to feel the pain of
the crisis spreading from the markets into the real economy.
Banks have also tightened credit, hurting producers, causing
buyers to cut back and hitting domestic orders, which are key in
the region's biggest market, Poland.
The Polish Purchasing Managers Index (PMI), an indicator
that can indicate future production, fell for the sixth month
running to 43.7 from September's 44.9, a record low and well
below the neutral reading of 50, Markit Economics and ABN Amro
said on Monday.
In the Czech Republic, it slumped for the seventh month in a
row to an all-time low of 41.2, just above the revised euro zone
figure of 41.1 released on Monday [].
Apart from Hungary, central Europe has been spared from the
worst bouts of the financial crisis. Banks, mostly part of
international groups, have largely focused on domestic lending
and fee businesses rather than investing into exotic derivatives
that have brought down some of their global peers.
But the euro zone recession and credit crunch are biting.
"The Czech numbers in particular show a high exposure of the
economy to Germany and the euro zone. Poland is more insulated,
but is (also) showing the impact of the slowing demand in the
euro zone," said Ivailo Vesselinov, emerging markets analyst at
Dresdner Kleinwort.
"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 (Poland, Slovakia, Czech Republic,
Hungary)."
The worrying factor for future output was new orders
statistics. In Poland, they fell to 40.3 from 43.0, and in the
Czech Republic to an unprecedented 36.1.
"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," the Czech survey
said. "Firms also highlighted worsening demand for automobiles."
JOBS SUFFER, INVESTMENT DOWN
In Hungary, a separate set of data provided by the
Association of Logistics, Purhcasing and Inventory Management
showed a PMI slump to all-time low of 44.7 points, down 5.2
points on the month [].
The Czech survey also showed an accelerated speed of job
cuts as companies adjust to the lower expected output.
Large firms, such as the Czech Volkswagen <VOWG.DE> unit
Skoda Auto, have been forced to cut output and even stopped work
for a week last month. The Czech car industry association,
representing the country's biggest manufacturing sector, has
reported its members may shed 10,000 jobs over the next six
months, about 8 percent of the sector's workforce.
Analysts watching the region have been slashing growth
forecasts for next year.Poland's central bank sees 2.8 percent
growth next year, while its Czech counterpart is seen slashing
its 3.6 percent in a new forecast due out on Nov. 6.
Analysts said the PMI readings were further ammunition for
central banks to lower interest rates.
"Potential for at least short-lived stability in the global
markets suggests that the rise in input costs will be temporary,
and that calls for central bank rate interest rate cuts will
mount into year end," said Lucy Bethell, an analyst at RBS.
Poland's bank is expected to keep rates flat until the new
year []. The Czechs started an easing cycle in
August, and are expected to cut by at least another 25 basis
points on Nov. 6 from 3.5 percent now [].
That would coincide with a 50 basis point cut expected from
the European Central Bank on the same day [].
FOR THE POLISH PMI TABLE DOUBLE CLICK ON []
FOR THE POLISH PMI INSTANT VIEW DOUBLE CLICK []
FOR THE CZECH PMI TABLE DOUBLE CLICK ON []
FOR THE CZECH PMI INSTANT VIEW DOUBLE CLICK ON
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(Writing by Jan Lopatka; Editing by Michael Winfrey and
Victoria Main)
