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Central Europe
August 4, 2017 www.intellinews.com I Page 12
sector continue to improve. The slowdown in that gain was driven by softer - although still solid - rates of growth in output and new orders.
Anecdotally, firms noted that higher production levels were due to greater demand from new and existing clients, the report reads. New orders stemmed from across business lines, increasing for an eleventh consecutive month.
That means the lack of skilled labour remains one of the main concerns for Czech manufacturers. “Employment grew at a strong pace, linked to increased production and new business,” notes IHS Markit’s Sian Jones. “However, firms still
Czech rate setters take the plunge
bne IntelliNews
The Czech National Bank announced on August 3 that it will raise interest rates by 20bp to leave the benchmark at 0.25%, making it the first central bank in the EU to hike rates in the recovery busi- ness cycle.
The move has been the subject of no little debate in recent weeks, as the CNB is clearly concerned by the progress of core inflation above its 2% tar- get. There are signs that further hikes could be in the pipeline for later this year or in early 2018, but at the same time the central bank struck a notably dovish tone at its press conference.
The hike in the benchmark is the first since Febru- ary 2008, and breaks a run of close to five years during which rates have sat at virtually zero. The
reported that labour shortages were restricting growth potential.”
“The latest IHS Markit forecast places industrial production growth for 2017 at 3.9%, up from 2.9% in 2016,” she adds, “with the manufacturing sector highlighted as a key contributor to expansion.”
Hungary's PMI reading showed the sharpest fall, after proving the only one in Visegrad to slow in June. Although it remains at elevated levels, the index dropped a full 2.7 points to 54.2, the Hungarian Association of Logistics, Purchasing and Inventory Management (Halpim) announced. Halpim also lowered the June reading by 0.3 points.
CNB board also decided to increase the Lombard rate by 25bp to 0.50% and keep the discount rate unchanged at 0.05%.
The move comes four months after the CNB dropped its cap on the koruna. Worries of a sharp rise in the value of the currency against the euro has clearly deterred a hike until now, but the koruna had made steady strides in recent weeks, reducing the risk of an erratic response.
Still, the CNB was clear in noting the pressures on monetary policy. The central bank asserted that inflation is “currently peaking” and argued that, despite strong wage pressure, growth in domestic costs will start to ease due to rising labour pro- ductivity growth.