Czech manufacturing expanded the most in more than three years in May, signaling economic recovery is gaining strength on the back of orders from at home and abroad.
The HSBC Purchasing Managers’ Index, a gauge of manufacturing performance, rose to 57.3 in May from 56.5 in the previous month, according to a report compiled by Markit Economics and published today.
New orders increased for a 12th month in May and at the strongest rate since January 2011, Markit said.
The “forward-looking components point to further output strength ahead,” Agata Urbanska-Giner, an economist for central and eastern Europe at HSBC, said in the PMI report.
“We expect gross-domestic-product growth to be picking up in the coming quarters in year-on-year terms and to be accompanied by a gradual increase of inflation.”
The central bank in Prague is watching the strength of the recovery for its inflation outlook after engaging in non-standard policy easing by weakening the koruna and setting a limit on the currency’s gains.
The revival is helping boost budget revenue at the time when the government plans to raise welfare and infrastructure spending while keeping the deficit below the European Union limit of 3 percent of annual output.
Preliminary data showed the economy expanded 2 percent in the first quarter, from a year earlier, the highest reading since the second quarter of 2011. Inflation remains subdued, with consumer prices rising 0.1 percent in April on an annual basis, the slowest pace in more than four years.
The Czech monetary authority followed in the footsteps of the European Central Bank and the Bank of Japan in trying to reflate the economy to spur a revival from a record-long recession.
Czech policy makers intervened to weaken the koruna in November and have signaled there is a rising chance they may maintain the limit on currency gains beyond February 2015.
The koruna has weakened 6.2 percent against the euro since its pre-intervention level on Nov. 6, more than its central European peer the Hungarian forint. The Czech currency was little changed at 27.474 per euro as of 11:26 a.m. in Prague.
bloomberg.com
The HSBC Purchasing Managers’ Index, a gauge of manufacturing performance, rose to 57.3 in May from 56.5 in the previous month, according to a report compiled by Markit Economics and published today.
New orders increased for a 12th month in May and at the strongest rate since January 2011, Markit said.
The “forward-looking components point to further output strength ahead,” Agata Urbanska-Giner, an economist for central and eastern Europe at HSBC, said in the PMI report.
“We expect gross-domestic-product growth to be picking up in the coming quarters in year-on-year terms and to be accompanied by a gradual increase of inflation.”
The central bank in Prague is watching the strength of the recovery for its inflation outlook after engaging in non-standard policy easing by weakening the koruna and setting a limit on the currency’s gains.
The revival is helping boost budget revenue at the time when the government plans to raise welfare and infrastructure spending while keeping the deficit below the European Union limit of 3 percent of annual output.
Preliminary data showed the economy expanded 2 percent in the first quarter, from a year earlier, the highest reading since the second quarter of 2011. Inflation remains subdued, with consumer prices rising 0.1 percent in April on an annual basis, the slowest pace in more than four years.
The Czech monetary authority followed in the footsteps of the European Central Bank and the Bank of Japan in trying to reflate the economy to spur a revival from a record-long recession.
Czech policy makers intervened to weaken the koruna in November and have signaled there is a rising chance they may maintain the limit on currency gains beyond February 2015.
The koruna has weakened 6.2 percent against the euro since its pre-intervention level on Nov. 6, more than its central European peer the Hungarian forint. The Czech currency was little changed at 27.474 per euro as of 11:26 a.m. in Prague.
bloomberg.com
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