March 3, 2014 / 11:06 AM / 4 years ago

WRAPUP 1-Polish, Czech PMIs show export growth surge

* Czech, Polish PMIs at long-term highs

* Strong export orders

* Trade links with Ukraine tiny but sentiment vulnerable

By Jan Lopatka

PRAGUE, March 3 (Reuters) - The Polish and Czech economies are picking up pace as both current manufacturing output and export orders to Europe surge despite a softer reading in their main export market, Germany, surveys showed on Monday.

The February HSBC Polish manufacturing Purchasing Managers Index (PMI) jumped to its highest level in over three years, boosted by the fastest new orders growth in a decade, Markit Economics said.

Czech data mirrored the trend, showing the second fastest export orders growth in the survey history, the highest level since a record seen in June 2010.

Hungary lagged the central European pack with a dip, although a different methodology makes Hungary’s numbers volatile and less comparable.

“Increasingly, emergence from the debt crisis in the EU is having a more positive sentiment impact than what is happening because of turbulences in (domestic) politics,” said Tatha Ghose, an economist at Commerzbank in London.

“The trend remains very strong,” he said.

The strong euro is a short-term positive although it is a risk in the long run, he added.

Central Europe has relatively minor trade links with neighbouring Ukraine.

However, financial market alarm over Ukraine’s standoff with Russia could hurt European Union economies in the region.

Fears of full-fledged Russia-Ukraine war reverberated across emerging markets on Monday, hurting currencies including Poland’s and Hungary’s although the rouble took the hardest hit.

“The trade link is irrelevant... but (there may be a hit) just from the spreads point of view, overall emerging market risk. The zloty is a volatile currency. Poland is fundamentally strong, but it does not help the zloty,” Ghose said.

Polish exports to Ukraine were worth $5.7 billion last year, about 3 percent of its total exports, Hungary exports around 2.4 percent to Ukraine and just 1 percent of Czech exports go there.


The HSBC Poland manufacturing PMI index (PMI) rose to 55.9 last month from 55.4 in January, data compiled by Markit and HSBC showed.

Any level over 50 signals economic expansion.

Analysts said Polish economic growth - which reached 2.7 percent in annual terms in the fourth quarter of 2013 - was well balanced and not reliant only on foreign demand. Economists polled by Reuters expect growth to accelerate to 3.1 percent in 2014 from 1.6 percent last year.

“Interestingly PMI rose so high even though PMI growth weakened in the euro zone,” Ursula Krynska, economist at Bank Millennium in Warsaw.

“All this is due to the fact that the Polish industry is experiencing growth not only on export orders but also thanks to domestic ones. It is therefore supported by double pillars: domestic and foreign.”

The Czech PMI rose to 56.5, the highest level in nearly three years, from 55.9 the previous month.

“Improvement in the Czech Manufacturing PMI is a surprise, as preliminary data on PMI from Germany and the aggregated euro zone were indicating that some decline from the already robust level ... was quite likely,” said Radomir Jac, Chief Analyst at Generali PPF Asset Management.

“The Czech economy started to recover during 2013 and the PMI survey indicates that this story continues also at beginning of 2014. We expect Czech GDP growth at 2.3 percent this year.”

Hungary’s PMI, released by the Association of Logistics, Purchasing and Inventory Management, dipped to 54.3 in February from January’s 57.8 but still held above a three-year average.

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