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INSTANT VIEW 3-Czech September PMI below 50 for 6th month

Monday, 1 Oct 2012 | 3:42 AM ET

PRAGUE, Oct 1 (Reuters) - The Czech Purchasing Managers' Index (PMI) fell to 48.0 in September from 48.7 the month before, stuck below the line dividing growth from contraction for a sixth straight month, a survey by Markit Economics showed on Monday.

The downturn in the Czech manufacturing economy showed little sign of ending in September with output declining the most in three years and demand at home and abroad weak, the survey said.

The Czech economy contracted by 1.0 percent year on year and by 0.2 percent quarter on quarter in the April-June period, extending a period of a recession started in the final months of 2011.

In neighbouring Poland, PMI fell to 47.0 in September from August's 48.3.

Hungary's seasonally-adjusted Purchasing Managers' Index

, compiled under a different methodology, was at 52.5 in September, up from a 49.6 in August.

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KEY POINTS: 09/12 08/12 09/11 Purchasing Managers' Index 48.0 48.7 53.3 Output 46.6 48.9 56.8

- Analysts had forecast a drop in PMI to 48.6. - A figure above 50 indicates expansion on the previous month while a number below 50 signals contraction.

(For table, double click on..................

) COMMENTARY:

DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE

"The Czech PMI worsened and so did the Polish one. While the data is mixed in the euro zone, it seems that in central Europe the rather negative aspects are being highlighted.

"In the Czech case, I think there is a correction of the previous relatively good data.

"So now what happens is that central and western Europe are converging again.

"This data points to a continuation of the shallow recession at the end of third quarter."

PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT BANK, PRAGUE

"The decline is ongoing, and the figure is slightly below the forecast - both ours and the consensus. That said, the figure also stays somewhat higher than other European countries. So I would see the value as consistent with stagnation in industrial output rather than any sharp decline."

AGATA URBANSKA, ECONOMIST, CENTRAL & EASTERN EUROPE AT HSBC

"September manufacturing PMI follows a month of July activity data releases with rebounding industrial production and retail sales. But the latter were boosted by low base effect while all other indicators including domestic business and consumer confidence by the statistical office, labour market data, German IFO and September PMI show the economy is still likely to slide deeper into recession.

"The only positive is that this process is slow and we still hope it will produce shallow recession though with a likely long and slow recovery.

"The PMI index averaged 48.9 in 2Q and inched lower marginally in the 3Q to 48.7, the lowest since 3Q09. The near-term risk is still for the slowdown to accelerate.

"Policy makers seemed to have exhausted their response options. If anything eyes need to be fixed on the fiscal policy side and the future of the vetoed pension system reform and fiscal austerity measures debated in the parliament at present."

DETAILS:

- New orders have declined for six successive months, but the decline stabilised after accelerating in July and August. - Data signalled that new export orders fell at a slower rate than total new work, indicating weakness in domestic markets. New export orders have now declined for 11 months in a row. - Manufacturing employment fell for a second month in September. Jobs in the sector have been cut eight times in the past 11 months. Firms also cut their level of purchasing activity in the latest period, leading to a further contraction in inventories of raw materials and other inputs. - Stocks of final goods fell as warehouses were sufficient to meet current demand. Stocks of both pre- and post-production goods have declined overall for the past 14 months. - The Czech central bank cut the key two-week repo rate to a record low of 0.25 percent on Sept. 27 to alleviate pressure from budget tightening.

BACKGROUND:

- Report on last Czech c.bank rate decision......

- July foreign trade figures.....................

- July industrial output figures.................

- Second-quarter GDP data........

LINKS:

- For LIVE Czech economic data releases, click on

- Instant Views on other Czech data

- Overview of Czech macroeconomic indicators

- Key data releases in central Europe

- For Czech money markets data click on

- Czech money guide

- Czech benchmark state bond prices

- Czech forward money market rates

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(Reporting by Mirka Krufova; Editing by Jason Hovet)

((prague.newsroom@thomsonreuters.com)(+420 224 190 477)(Reuters Messaging: mirka.krufova.thomsonreuters.com@reuters.net))

Keywords: CZECH PMI/