Page 10 - bne_newspaper_May 5 2017

Central Europe
May 5, 2017 www.intellinews.com I Page 10
Central European PMI readings still waiting for output to catch up
bne IntelliNews
Central European manufacturing purchasing manager indices (PMI) for April posted another set of strong readings on May 2. The challenge now is for industrial activity to catch up with the very strong PMI data and confidence readings seen this year.
Boosted by robust activity in the Eurozone, which provides the bulk of demand for the small and open Visegrad economies, PMI readings have been pushing high above the 50-point threshold that separates contraction from expansion for some months. A regional recovery in investment, driven by EU-funded projects, is also helping stoke domestic demand.
However, industrial output has struggled to keep pace, largely recording moderate growth levels through the first quarter of the year. Still, impres- sive data out of Poland in March suggests the good mood may now finally be translating into concrete results.
The Eurozone PMI gained a further 0.5 point in April to rise to a six-year higher of 56.7. Output, new orders and employment all grew at the quick- est rate seen over the same period.
At the same time, the German reading, although leading the single-currency area at 58.2, pulled back to a two-month low. That could temper Cen- tral European confidence going forwards, given the large role that the region’s factories play in the German supply chain.
Meanwhile, although input prices remain el- evated, they eased from recent highs, in line with
inflation readings across Europe. That soothes worries earlier in the year that the bustle in activ- ity could send consumer price indices spiralling higher.
“This may cause expectations for near-term monetary policy normalisation [in Central Europe] to be pared back,” suggests William Jackson at Capital Economics.
Poland’s PMI grew 0.6 points to 54.1 in April, re- maining at an elevated level to mark the strength of sentiment in the Polish industrial sector into the second quarter. The reading provides a solid footing for April output following the surge in March.
The Polish PMI has stood above the 50-point threshold for 31 consecutive months now. The result in April came as a result of growing “output and new orders, along with notable employment growth”, noted Markit, compiler of the Polish and Czech PMI reports.
The Czech PMI remained at 57.5 for a second month, after dropping 0.1 point in March from February’s 19-month high. The elevated reading continues to ride on accelerating growth in output and new orders, the latter suggesting that strong performance should persist, at least short term.
Hungary's PMI reading was also unchanged in April, the Hungarian Association of Logistics, Purchasing and Inventory Management (Halpim) announced. At 55.9 points the result is well above the April average of recent years.