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PRAGUE, Aug 3 (Reuters) - The Czech Purchasing Managers'
Index (PMI) inched up to a 10-month high in July, following an
improvement in industrial output figures in a fresh sign the
economy may be nearing the bottom, Markit Economics said.
The manufacturing PMI inched up to 43.5 from 41.9 in June
and a record low of 31.5 in January.
The index rose for the sixth month running but still
remained below the neutral 50 mark, indicating an 13th straight
month of decline.
The industrial sector has been tracking developments in
Germany, the country's key export market. Germany's private
sector took a stride towards recovery in July, with a flash PMI
estimate rising to 48.9, from 44.0 in June -- closing in on the
50 level that separates contraction from expansion.
The Czech economy shrank by 3.4 percent in the first quarter
from the previous three months, but economists said it may have
touched the bottom in the second quarter.
A flash estimate for June industrial output showed a
smaller-than-expected 12.3 percent year-on-year drop on Friday,
and new orders fell 13.0 percent.
The PMI figures showed the volume of new contracts in the
manufacturing sector fell for the twelfth month running, but at
the weakest rate over the period.
New export orders fell more slowly, with firms reporting
signs of recovery in the key German market, Markit said.
The outlook for the labour market remained bleak in July as
manufacturing employment continued to contract rapidly.
Poland's purchasing managers' index rose at a record pace in
July to its highest in more than a year, but was still stuck
below the breakeven 50 level dividing contraction from growth.
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KEY POINTS:
07/09 06/09 07/08
Purchasing Managers' Index 43.5 41.9 49.9
Output 45.8 44.1 49.9
(For table, double click on......................[]
- A figure above 50 indicates expansion on the previous month
while a number below 50 signals contraction.
COMMENTARY:
TREVOR BALCHIN, ECONOMIST AT MARKIT
"The latest PMI data provide further signs that the severe
downturn in the Czech manufacturing sector has passed its worst
phase as we move into the second half of the year. The key
output and new orders components were both at levels not seen
since prior to the tumultuous events in global financial markets
of last autumn, while a survey-record rate of destocking
strongly points to increases in production in the coming months.
That said, overall business conditions have yet to improve and
the employment data remain a cause for concern."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"It's in line with the improvements in industrial figures
that we saw last week. And it's a sign that we may have the
worst behind us. In the months to come, we can expect a slight
improvement in exports and industrial production. However, we
have seen a deepening recession in domestic demand."
"So the way out of recession is not as easy as seen in the
PMI data. But what will be most important is the development in
the euro zone, and there are more and more green shoots, raising
hopes for the Czech economy."
"We could see positive GDP numbers in the first quarter, so
this improvement in PMI strengthens those expectations.
"If we can hope for one more rate cut this month, it is
possibly the last chance."
PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT, PRAGUE
"The positive side of the coin is that PMI has been growing.
On the other hand, the increment since the last month does not
look impressive. It appears the Czech PMI will be one of the
weakest in Europe. That hints that Czech manufacturing will
start to recover only with some delay after major markets like
Germany. It's not surprising but it is negative."
BACKGROUND:
- Report on last Czech c.bank rate decision.......[]
[] []
- May foreign trade figures.......................[]
- June industrial output...........................[]
[]
- First-quarter GDP growth data.................. []
[]
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- Overview of Czech macroeconomic indicators []
- Key data releases in central Europe []
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- Czech money guide <CZK/1>
- Czech benchmark state bond prices <0#CZBMK=>
- Czech forward money market rates <CZKFRA>
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(Reporting by Mirka Krufova, editing by Jan Lopatka)
