Forward looking data on Central Europe’s vital manufacturing sector presented a mixed picture on April 1, though overall,the region’s purchasing manager indices (PMI) remain in expansionary territory, and continue to suggest resilience to the stuttering recovery in the Eurozone and troubles in emerging markets.
Poland’s PMI performed better than expected as it swelled to 53.8 in March from 52.8 in February, the fastest growth in eight months, compiler Markit reported. The “better than expected outcome mainly resulted from faster growth of output, new orders, exports and employment", notes BZWBK in a note.
The Czech reading pulled back, to 54.3 in March from 55.5 in February, but remains relatively high. "Czech PMI remains at high levels and still points to very solid expansion of the manufacturing sector,” points out RBI.
Hungary’s reading was the biggest surprise, as it dropped to 51.7 points in March from 54.8 in February, according to the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM) reported. While the country’s locally compiled PMI is seen as a poor guide to eventual industrial production, it’s descent towards the 50-point threshold separating expansion from contraction still appears to reflect recent weak output data.
Still, overall the data was well received, as it suggests the region’s factories continue to shrug off weakness in the Eurozone, which provides the vast bulk of export demand. The single-currency area’s composite PMI perked up slightly, coming in at 51.6 in March.
While that was an improvement of 0.2 points over the February reading, it still represents the second-weakest improvement in manufacturing conditions for just over a year.
While the German reading continues to hover only marginally above the stagnation mark, it is showing signs of stabilization after recent falls. That will be particularly welcome in Central Europe given the region’s large role in the supply chain for the EU’s biggest economy.
“The fact that the Polish PMI rose further supports our view that it will be one of the best performing economies in the region this year,” writes William Jackson at Capital Economics.
“On past form, our [composite] Central Europe PMI points to industrial production growth of a little over 5% y/y in the months ahead, up from around 4.5% y/y in early 2016,” the analyst points out. “That’s particularly encouraging in light of some of the softer survey data in Q1 from key Eurozone trading partners.”
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