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Czech manufacturing output flat in June

Main positive from HSBC survey is increase in Czech employment, following job shedding in the previous two months

Czech manufacturing performance deteriorated for a third month in June as new export business in the sector fell for an eight month running due to the ongoing crisis and uncertainty in Western European markets, an industry gauge published Monday showed.

The HSBC Czech Republic Manufacturing PMI rose to 49.4, from a 33-month low of 47.6 in May, but remained in contraction territory, “signaling a deteriorated in overall business conditions for the third month running,” said the bank in a report compiled by Markit, a financial services company.

New orders fell at a much slower rate, while production was broadly unchanged and firms expanded workforces having cut staff the previous month. Manufacturing new orders declined in June, rounding off contraction throughout the second quarter, HSBC said.

The main positive from the latest survey was an increase in employment, following job shedding in the previous two months. Meanwhile, purchasing volumes were flat and stocks of inputs fell at a robust pace.

“Following sharper than expected GDP contraction in1Q2012 and worsening leading indicators in Germany, [the Czech Republic’s] main trading partner, the improvement in PMI reading between May and June is encouraging,” said Agata Urbanska, Economist, Central & Eastern Europe at HSBC.

“We assume the fall in economic activity to be shallow though and PMI’s rebound in June supports this assertion. June PMI components showed stabilization in output and growing employment,” she said.

The Czech National Bank (ČNB) last week cut its key interest rate by a quarter of a point to a record low 0.5 percent, in line with market expectations, after months of sluggish domestic demand having sparked an economic recession.

According to the last GDP data, the Czech economy fell into a recession in the fourth quarter of 2011 as it dropped 0.2 percent quarter on quarter. In the first quarter of 2012, GDP lost 0.8 percent on the quarter, according to the Czech Statistical Office (ČSÚ). Inflation eased to 3.2 percent in May, the lowest this year, from 3.5 percent in April.