ADVERTISEMENT

Output slows in eastern Europe, holidays play role

Automotive

Industrial output in eastern Europe slowed sharply in March, partly due to lower demand from the euro zone, but analysts said Easter holidays were the main reason and stayed optimistic ahead of next week’s quarterly growth data.

In Slovakia, the region’s growth leader, output slammed on the brakes to grow just 1.8%, data showed on Friday. Output growth was 12.5% in February, and the sharp slowdown was mirrored in Hungary, Romania and Poland. The Slovak drop off was mainly due to a huge drop off in car manufacturing -- the country of 5.4 million people is the world’s top auto producer per capita -- which plummeted to just 4.7% growth, versus a spike of 31.0% in February.

The developing, open economies are sensitive to demand for their goods from the euro zone, and the region is now feeling the ripples of the US-led global slowdown. But, although the data were adjusted for working days, analysts said the output figure was still mainly affected by holidays for Easter, which fell earlier than usual this year, and added such significant falls should not be repeated in the near future. “Industrial production is a rather volatile series, thus the sharp fall in March does not necessarily mean the end of strong (Slovak) growth,” said Piotr Matys, a 4Cast analyst in London. The data precedes preliminary Q1 economic growth data from Slovakia, the Czech Republic and regional laggard Hungary due out on May 15.

Romanian March output was up 6.7% on the month, but its annual figure also slowed to just 2.9%, from 7.7 in February. It was largely affected by a drop in energy production of 2.9% and a fast deceleration in manufacturing. Polish output figures released in April also came in very low at 0.9%, significantly below the 8% forecast, while the Czechs’ industrial output, due out on Monday, is expected to drop to 4.8%, from 11.3% in February.

 
GRADUAL SOFTENING
Raffaella Tenconi, an economist at Dresdner Kleinwort, said lower demand from the euro zone -- the destination for most of the region’s exports -- is having an impact. But she and other analysts agreed the holiday effect had had the greatest impact and the output drop would not drastically hit Q1 Czech, Slovak and Hungarian growth data expected on May 15. “There is a slowdown. If you look across the region, business confidence is deteriorating, orders are down. But at this stage, you’re looking at a gradual softening,” she said. “There is no evidence of a sharp slowdown the way the industrial production numbers would indicate.”

Hungary is expected to show Q1 growth of an annual 1.25% on Thursday, according to a Reuters poll, creeping up from 0.8% the previous quarter. The Czechs are seen slowing to 5.7%, from 6.6%, and analysts expect the regional growth leading Slovaks to have dropped significantly from a better-than-expected 14.3% spike in the last quarter of 2007. Tenconi added the slowdown had made central banks look more closely at growth than inflation, giving rise to potential risks as price growth -- fuelled by oil and food as well as wage hike demands and rampant domestic consumption -- remained a threat. “The March numbers have made central banks more cautious, which in my view may be a bit of a risk,” Tenconi said. (Reuters)

ADVERTISEMENT

Rate-setters augur slower decline in CPI in 2022 Analysis

Rate-setters augur slower decline in CPI in 2022

Lawmakers approve residency permit for digital nomads Parliament

Lawmakers approve residency permit for digital nomads

The strongest move - Morgan Stanley Hungary head and Chess F... Podcasts

The strongest move - Morgan Stanley Hungary head and Chess F...

ITM, capital gov't agree on support for public transport City

ITM, capital gov't agree on support for public transport

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.