* Polish PMI at 34-month high of 53.3
* Czech PMI flat at 57.6
* Hungarian PMI, different methodology, dips to 49.5
* Weak euro seen helping, but recovery unbalanced
By Michael Winfrey
PRAGUE, July 1 (Reuters) - Surging exports helped
manufacturing in the European Union's biggest emerging economies
race ahead in June, but analysts said signs of slowdown in their
western export markets is likely to weigh later this year.
The Purchasing Managers' Index for the region's largest
economy Poland <PLPMI=ECI> rose to 53.3 points, its highest
level in almost three years, as producers recorded a jump in new
orders and sales abroad, data from Markit showed on Thursday.
Czech PMI was flat but well above the 50-point break-even
mark separating growth from contraction. At 57.6, it expanded
for the eighth straight month on rapid rises in output and new
orders and a survey-record expansion in new export business.
The figures were helped by the strong dollar, which hit a
four-year high against the euro last week to help boost euro
zone exports in whose supply chains eastern EU countries play an
important role.
But other data last month from western Europe showed dimming
confidence about the recovery as governments across the
continent push forward with austerity measures.
The PMI index for business expectations in the euro zone's
dominant service sector fell to its lowest point since July
2009, while a separate survey showed French producer confidence
had unexpectedly declined. []
"Investors are beginning to perceive the risk of the
slowdown in the economic activity in the second half of the
year," said Miroslav Frayer, an analyst at Czech Komercni Banka.
"There is a risk of some economic dampening because there is
a need to consolidate public finances. It is not only our
problem but a problem of the entire euro zone and the world."
Hungarian PMI, compiled under different standards, dipped to
49.5 in June, from 49.6 in May, hurt by a 3.8 point drop in
output volume and a 2.5 point decline in product stocks.
AUSTERITY
Germany's manufacturing sector grew a ninth month running in
June, although it expanded slower than March and April, while
PMI data from Britain and France showed growth there was also
easing its pace.
The euro's weakness over concerns about the euro zone's
ability to deal with the large debt burdens of its weaker
members played a positive role, analysts said.
But they added that would most likely be outweighed by
austerity measures that have begun to bite as governments
scramble to slash budget deficits and rein in borrowing.
That may hurt growth in the second half by undercutting
domestic demand. Czech industrial output showed an annual
expansion of 10.9 percent in April and retail sales fell 4.5
percent.
"The broad trend ... is the increase in PMIs has probably
leveled off but will stabilise at relatively high levels,
consistent with reasonably high growth in industry," said Neil
Shearing of London-based Capital Economics.
"The problem remains that it's not spreading to other
sectors (like services and domestic demand). So it still remains
a very unbalanced recovery... I still remain cautiously
pessimistic."
Nevertheless, the Czechs and Poles are expected to shine
compared with other EU states in the recovery. Poland's finance
minister said this week the economy could grow by as much as 3.5
percent this year. The Czechs expect growth of 1.5 percent.
That growth will outpace the expansion in cost-cutting euro
zone states and has led policymakers in the former communist
East to end a rate-easing cycle, even if it may take until next
year for them to begin raising the cost of borrowing again.
"The (Polish) Monetary Policy Council will have to discuss
interest rates hikes and observe the economy, choosing the right
time to raise borrowing costs," said Jacek Wisniewski, chief
economist at Raffeisen Warsaw.
"And taking into account the improving situation and low
inflation, it might be difficult to choose that right time."
(Additional reporting by Jakub Jaworowski and Jana Mlcochova,
Editing by Sonya Hepinstall)
