Emerging Europe's factories doing better amid economic gloom

Mon Jul 1, 2013 6:18am EDT
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By Jana Mlcochova

PRAGUE (Reuters) - Business conditions in central and eastern Europe improved in June, propped up by rising new orders, but economists said more signs of revival were needed to see whether the region's economic downturn has bottomed out.

Facing pressures from the slump in their main export market, the euro zone, and at home from falling domestic demand, emerging Europe's economies are battling weak growth and falling inflation.

In the Czech Republic, which has been hit by the deepest recession in the region, having shrunk for six consecutive quarters, the purchasing managers' index (PMI) rose to 51.0 in June from May's 50.1, the best result since March 2012.

Output also rose and new orders increased for the first time in four months.

In neighboring Poland, which has so far avoided the recession that has hit the rest of the region, the PMI rose to 49.3 points from 48.0 points previously, the highest in 11 months although still in contractionary territory.

"The picture is mixed," said Daniel Hewitt from Barclays Bank.

The Czech Republic's PMI has been rising for four months, indicating the economic contraction could have bottomed out but hard data from the economy have been weak.

The statistics bureau unexpectedly revised down first quarter gross domestic product (GDP) data last week saying the export-reliant economy shrank by a quarterly 1.3 percent, rather than 1.1 percent seen earlier.   Continued...

Employees work at a dairy plant in Litovel, one of the world's biggest producer of traditionally made parmesan cheese, June 27, 2012. REUTERS/Petr Josek