(Combines stories, adds quotes, details)
* Polish manufacturing PMI falls to 11-month low
* Firms cite Ukraine crisis as reason for weak orders
* Czech PMI soars to 57.3 points, beats expectations
* Hungary's PMI weakens slightly, but still strong
By Marcin Goettig
WARSAW, June 2 Polish factory activity slowed
unexpectedly in May yet Czech manufacturing grew at its fastest
pace in two years, data showed on Monday, underlining Poland's
exposure to the Ukraine crisis.
The HSBC Poland manufacturing PMI index (PMI) for Poland
fell to 50.8 points last month, an 11-month low, from 52.0 in
April and compared to 52.4 expected by economists polled by
Readings above 50 point to expansions in activity.
Markit said some firms cited the Russia-Ukraine tensions as
a reason for the fall in new export orders, the first such
decline in 12 months.
"The Polish manufacturing sector edged closer to stagnation
in May," Markit said. "Growth of both output and new orders
slowed for the third successive month to weak rates."
Poland, which accounts for around 40 percent of the region's
annual output, has emerged as one of the staunchest supporters
of Kiev and strongly condemned Russia's annexation of
The strength of Poland's zloty currency may also
have weighed on exports.
Russia has imposed an ban on Polish pork imports, which
Polish officials said was politically motivated. Moscow has also
banned imports of products from some Polish milk processing
Analysts at Bank Pekao said the Russia-Ukraine crisis "has
increased the uncertainty regarding future demand, which clearly
reduced the propensity of firms to further increase employment".
The PMI data painted a much less optimistic outlook for the
economy than the first-quarter economic growth data.
"The PMI survey supports our expectations of economic
activity consolidating in 2014 with GDP (gross domestic product)
growth at just over 3 percent year-on-year," said Agata
Urbanska-Giner, CEE economist at HSBC.
Suggesting greater insulation from the Ukraine crisis, the
Czech manufacturing PMI rose to 57.3 points in May, its highest
level in over 2 years and bucking analyst expectations for the
index to fall to 55.4 points.
"In the Czech Republic, unlike Poland, the Russia-Ukraine
crisis has had little impact on the society's perception," said
Piotr Kalisz, central and eastern Europe economist at Citi's
He added that after an expected slowdown in the Polish
economy in the second quarter, it will likely pick up again in
the third, narrowing the divergence.
Hungary, which uses a different PMI index released by the
Association of Logistics, Purchasing and Inventory Management,
reported the index fell slightly to 53.9 in May from 54.6 in
Analysts said the data still showed a relatively high level
of growth in the country's industrial sector, which saw heavy
investment in recent year from such firms as Mercedes or Audi.
"This is a good figure, shows a clear expansion and
indicates that industrial output growth will be strong this
year," said David Nemeth, an analyst at K&H Bank.
Poland currently has higher interest rates than both the
Czech Republic and Hungary.
The Polish central bank has said it would likely keep rates
on hold at 2.5 percent until at least September. Its stance has
already translated into gains for the Polish zloty, which make
Polish exports relatively less competitive.
In turn, the Czech central bank has slashed rates to almost
zero and started intervening to weaken the crown currency.
(Writing by Marcin Goettig; Additional reporting by Krisztina
Than in BUDAPEST and Mirka Krufova in PRAGUE, Editing by Ruth
Pitchford; email@example.com; +48226539720;