It is reported that growth in the Czech manufacturing sector slowed down in May, posting the weakest overall improvements in the business sector since February 2010. The Purchasing Managers' Index showed that rates of expansion in output, new orders and jobs all eased since April 2011.
This was accompanied by a moderation of inflationary pressures, although suppliers’ delivery times continued to increase, business information firm Markit Economics, which compiles the index along with the bank HSBC.
PMI indicates manufacturing performance derived from indicators for new orders, output, employment, suppliers' delivery times and stocks of purchases. Any figure above 50.0 shows overall improvement of the sector. The PMI posted its steepest one month decline since December 2008 in May, dropping to 55.9 and hitting its lowest level since February 2010, adding that the latest data signaled a broad based easing in momentum across both domestic and export markets.
Mr Murat Ulgen HSBC chief economist for Central and Eastern Europe and sub Saharan Africa said that "Manufacturing conditions eased sharply in May for the Czech Republic, dropping by 3.1 points during the month. All components showed signs of slowdown, led by output and even the more forward looking components such as new orders and new export orders fell sharply. This slowdown appears to be in line with the slowdown in other parts of Europe."
He added that "As a result, the headline index dropped to its lowest level in 15 months but still remains above the long term average and well above the no change 50 level. This slowdown appears to be in line with the slowdown in other parts of Europe including the core eurozone, where the PMIs have started to soften as well in May 2011."
According to Markit Economics, manufacturers received a greater volume of new orders in May 2011 as compared to the previous month, but the growth rate slowed sharply to the weakest since February 2010. Production rose for the 24th month in a row in May, but the pace of expansion slowed for the fourth successive month from January’s record to the weakest since December 2009. Employment growth remained sharp; however, it slowed to a four month low.
Mr Ulgen said that "With both output and new orders indexes falling sharply, the stocks of purchases index fell as well during the month but the finished goods inventory continued to rise suggesting that the drop in output growth was not enough to offset the easing in demand. The pace of hiring slowed in May as well in response to the expectations of slower manufacturing activity over the coming months."
He added that "The slowdown in growth as well as the easing of global commodity prices is beginning to ease price pressures in the economy as well, with both input and output prices indices declining in May for the second month in a row."
Input price inflation slowed substantially in May, reflecting recent declines in global commodity prices. Inflationary pressure eased the most since October 2008, and the overall pace was the slowest for 14 months. Subsequently, output price inflation also slowed in May.
(Sourced from www.ceskapozice.cz)
