* Poland, Hungary and Czech PMIs point to solid growth
* Polish, Czech figures beat forecasts in November
* Czech PMI shows exports benefit from c.bank interventions
* PMIs signal CEE economies likely to strengthen in Q4
By Marcin Goettig
WARSAW, Dec 2 Manufacturing in central Europe
picked up in November, pointing to stronger economic growth in
the region in the fourth quarter thanks to rising demand from
European powerhouse Germany and a gradual revival in domestic
Purchasing managers' surveys released on Monday raised
expectations that the Czech economy, which has lagged the
region, could return to growth this quarter, helped by central
bank intervention to weaken the crown.
In Poland, manufacturing activity grew in November at its
fastest pace since April 2011 and the data added to signs of a
broad-based rebound in central Europe's biggest economy.
Purchasing managers' indexes for the Czech Republic and
Poland beat forecasts and factory activity also accelerated in
"The (Czech) PMI improvement further into growth territory
is a strong signal that the weak GDP number for the third
quarter, probably has not marked a return into recession," said
Vojtech Benda, chief economist at BHS Securities.
The Czech purchasing managers' index (PMI) jumped to 55.4 in
November, its highest level since May 2011, from 54.5 in October
and above a forecast of 54.7. Any PMI reading above 50 signals
an expansion in activity.
The Polish manufacturing PMI rose to 54.4 from 53.4 a month
earlier, according to a survey by Markit and HSBC.
Increased activity in Poland, which accounts for around 40
percent of the region's roughly 940 billion euro ($1.28
trillion) annual output, was driven by strong demand from both
domestic and export markets, Markit said.
"Such a significant rise in the index bodes very well
regarding the pace of economic growth in the fourth quarter,"
Piotr Bielski, senior economist at BZ WBK, said.
Poland's economy appeared to be running on all cylinders
again in the third quarter with a long-awaited rise in domestic
demand and investment helping growth accelerate to 0.6 percent
over the previous quarter.
Central banks in Poland, Hungary and the Czech Republic have
slashed interest rates to record lows to try and stimulate
growth. Hungary is expected to cut rates further, while Poland
is seen keeping them flat in the first half of next year.
Central European economies are also benefiting from
accelerating demand in Germany, the region's biggest export
market. That also makes them vulnerable to any sudden slowdown
in German demand or renewed turmoil in the euro zone.
The Czech PMI suggested the central bank's move to intervene
to weaken the crown was starting to have an impact as foreign
orders rose in November.
The bank launched the first crown sales on the open market
in over a decade at the beginning of November to avert deflation
and support the economy, which has suffered from tight
government spending and political instability and shrank in the
third quarter soon after emerging from a long recession.
The crown has weakened by about 6 percent
against the euro since early November.
Citigroup said PMI readings for November across the region
were "very strong".
"In the Czech Republic, we see a chance that with continuing
export-led recovery there will be a positive pass-through from
the weaker crown also to domestic demand through an improved
labour market," Citi said in a note.
Hungary, which uses a different PMI index released by the
Association of Logistics, Purchasing and Inventory Management,
reported the index jumped to 52.6 in November from a revised
51.1 in October and beating the three-year average of 51.9.
Production volumes increased from the previous month, while
new orders and purchased stocks were also higher. The employment
index, imports and exports all increased from October, the
"The figures are definitely signalling growth which means
Hungarian industrial output is on the right track," said Andras
Balatoni, an analyst at ING. "As international demand picks up,
that will result in substantial growth in industry output."
Hungary's economy accelerated in the third quarter, growing
0.8 percent on a quarterly basis, after pulling out of recession
in the second quarter.
Prime Minister Viktor Orban has been heavily criticised for
his unorthodox brand of crisis management that includes Europe's
highest bank tax and new levies on some businesses such as
energy firms and telecoms.
But he has spared the export-oriented car sector, and his
government is betting on a significant boost from car
manufacturing to help the economy gather speed by next year,
when the ruling party faces elections.
Germany's Audi launched production at a new 900
million euro plant in Hungary earlier this year, giving the
sluggish economy a much-needed boost.