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Central Europe
August 4, 2017 www.intellinews.com I Page 11
Central Europe’s factories remain busy despite a summer lull in PMIs
bne IntelliNews
Manufacturers in Central Europe reported a step back in activity and confidence in July, purchasing managers’ indices (PMI) released by IHS Markit on August 1 showed. While, the indicators still suggest manufacturing continues to enjoy strong growth, and will offer significant contributions to economic expansion this year, they also hint at a slowdown at the start of the third quarter.
As so often, the region is following the Eurozone, which is the font of an overwhelming bulk of for- eign demand for the small and open economies. The single-currency area saw a slight moderation in the recent strong rate of expansion of its manu- facturing sector. The Eurozone PMI dropped 0.8 points from June’s 74-month high to stand at 56.6.
The Eurozone PMI has remained above the 50.0-point threshold separating expansion from contraction for 49 successive months. Germany, in whose supply chain the Visegrad countries play a significant role, saw its PMI sink to a five-month low, although as with all the readings, the 58.1 point result still indicates robust activity.
“[W]hile it looks like growth in Central Europe... weakened at the start of Q3, activity remained strong,” sum up analysts at Capital Economics. Poland’s PMI was exactly in line with the Eurozone indicator, as it also declined 0.8 point in July to stand at 52.3. While the index remains above its historical average of 50.5, the reading indicates “only moderate growth,” IHS Markit notes.
The reading follows a solid performance from the
industrial sector in June, when output expanded 6.7% y/y in adjusted terms. In unadjusted terms, however, growth came in at just 4.5% y/y, halving in comparison to the expansion of 9.1% y/y the previous month.
“The latest PMI data present a downside risk to GDP growth, which IHS Markit currently expects to hit 3.7% y/y in 2017,” economist Sam Teague said in a comment. Still, the Polish PMI has now remained above the 50-point threshold for 33 consecutive months now.
“Moderate growth in production, new orders
and employment all contributed towards July’s result,” IHS Markit noted. On the price front, rates of input costs eased slightly, while part of the increase in raw materials costs was passed on to customers, with output prices rising solidly. The level of new orders from abroad expanded above that of new orders, signalling that export demand was stronger than demand on the domestic market.
The fall in the index in July appears likely a one off, they suggest at BZWBK, as confidence on future growth prospects remained strongly positive, on the back of optimism towards new technology, increasing demand and rising business investment.
The Czech PMI fell 0.9 points to dip to a year-to- date nadir of 55.3. However, HIS Markit points
out that the indicator remains well inside growth territory, meaning conditions in the manufacturing