WARSAW/PRAGUE, May 4 (Reuters) - Sentiment in central European manufacturing fell in April as coronavirus-related lockdowns put the brakes on factory activity, leading to steep declines in output and new orders.
Purchasing manager surveys released on Monday showed manufacturing activity in the region’s largest economy, Poland, slumped to a record low. Activity in the Czech Republic fell to its lowest since March 2009.
Hungary’s seasonally adjusted Purchasing Managers’ Index recovered somewhat but remained near a historic low set in March.
After years of strong growth, central Europe’s economies have been floored by the coronavirus pandemic. Many plants, including those in the crucial auto industry, are only now coming back online after shutting in March, possibly providing some relief even as output is crushed this quarter.
“April’s manufacturing PMIs for Emerging Europe fell off a cliff and point to industrial production declining at a record pace in Q2,” said Liam Peach, emerging Europe economist at Capital Economics.
The International Monetary Fund has forecast economies in the region could contract 3% to 6% in 2020; some analysts say it could be worse.
Governments in the region have stepped in to help, with multi-billion programmes of direct state aid, loan guarantees and liquidity measures to help companies weather the crisis.
The Czech government has pledged over 1 trillion crowns ($40.22 billion) in direct aid and state guarantees for loans, although business associations have complained the help was coming too slowly. Poland has announced measures worth over 300 billion zlotys ($71.91 billion) in total.
The outlook for industry remains challenging. The Czech car industry’s main association has estimated factories will run at 60% to 90% of capacity for the rest of the year.
Businesses will continue to need help, officials say.
“Our company surveys show the drop in orders will continue in the coming months. Firms that have so far stayed above water and haven’t needed help can get into trouble,” Czech Industry Confederation Vice-President Jan Rafaj said last week in an online conference call with companies and media.
With countries in the region slowly reopening shops, restaurants and other businesses and factories getting back to work, some analysts said a bottom may already be seen.
"The situation in industry and other segments of the economy will start to improve along with the easing of restrictions connected to the outbreak," said Radomir Jac, chief economist at Generali Investments CEE. ** For an interactive graphic on GDP developments in Central Europe: reut.rs/3exsJHO?eikon=true (Reporting by Alan Charlish and Anna Wlodarczak-Semczuk in Warsaw, Jason Hovet and Robert Muller in Prague and Anita Komuves in Budapest; editing by Larry King)