Central Europe's factory decline eases in June

[July 01, 2020]  By Alan Charlish and Jason Hovet

WARSAW/PRAGUE(Reuters) - The downturn in central European manufacturing eased markedly in June as economies reopened after the coronavirus lockdown, surveys showed on Wednesday, but the sector was still some way from returning to growth.

Manufacturing output plunged as the pandemic brought many plants to a standstill in March and April. Restrictions started to be eased in May.

While economists say the worst has passed, central banks and governments in Poland, Hungary and the Czech Republic forecast gross domestic product will shrink by 3-8% in 2020.

"The beginning of the pandemic was difficult, it began with a lot of absences and a decline in export orders," said Ryszard Florek, chief executive of Polish window manufacturer Fakro.

"At the moment the situation is calming down. We have no declines in Poland, we are resuming export sales."

IHS Markit's Purchasing Managers' Index (PMI) for manufacturing in Poland rose to 47.2 in June from 40.6 in May, while a PMI for the Czech Republic rose to 44.9 from 39.6.

Readings below 50.0 denote a contraction in activity.

Hungary's seasonally adjusted PMI <HUPMI=ECI> rose to 47.0 in June from a revised 40.7 in May, the Association of Logistics, Purchasing and Inventory Management, which compiles the survey, said.

The surveys mirrored the situation in main trading partner Germany.

Workers enter Skoda Auto's factory as the company restarts production after shutting down last month due to the coronavirus disease (COVID-19) outbreak in Mlada Boleslav, Czech Republic, April 27, 2020. REUTERS/David W Cerny/File Photo

"It (Hungarian PMI) shows some improvement, however, in my view this ... is far from the V-shaped rebound story," said Peter Virovacz is a Senior Economist at ING in Budapest.

"Maybe there is a silver lining in the improvement but overall we are far from out of the woods."

A survey by Czech group J&T Banka found most firms, entrepreneurs and top managers it surveyed did not expect a speedy economic recovery and more than a third saw a rebound taking multiple years.

"The expectation of new orders remains very uncertain," said Bohuslav Cizek, director of economic affairs at the Czech Confederation of Industry.

"Some sectors had been directly affected by the restrictive measures. On the other hand, many companies will face overall lower demand in the following months."

(Reporting by Alan Charlish and Pawel Florkiewicz in Warsaw, Jason Hovet in Prague and Marton Dunai in Budapest; Editing by Catherine Evans)

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