Czech PMI shows record rise in employment

New export order growth shows the country is benefiting from the global recovery, but raw material prices are rising due to demand

Economy
Raymond Johnston | 02.05.2011

The Czech manufacturing sector continued to record strong expansion at the start of the second quarter, the HSBC Czech Republic Manufacturing Purchasing Managers’ Index (PMI) released on Monday shows. The PMI composite rose in April from 58.6 to 59.0, the fourth-highest since the survey began in July 2001.

The gain since March reflected faster rises in new orders, employment and stocks of purchases, the report said. A score greater than 50 signals overall growth. The index has shown growth since November 2009.

A notable finding was that the strength of manufacturing business conditions showed a survey-record increase in employment in April. Companies on average have increased their work forces every month since March 2010, the report said. ‘A strong rise in new export orders index also indicates that the global trade cycle continues to help the Czech manufacturing sector.’

“Manufacturing conditions improved at a quicker pace for the first time in three months in April in the Czech Republic and the PMI is only around 1.5 points below the record high noted in January this year. While output growth moderated slightly during the month, all other components of the index rose, with particular strength seen in the new orders component,” Murat Ulgen, HSBC Chief Economist for Central & Eastern Europe and sub-Saharan Africa, said in the report.

New order growth strengthened in April after having slowed to its weakest level in over a year in March. The latest figures signaled strong domestic and export market growth.

“A strong rise in new export orders index also indicates that the global trade cycle continues to help the Czech manufacturing sector.  This suggests that the outlook for Q2 growth remains robust after the strength seen in Q1 2011. The improvement in manufacturing conditions as well as further increases in the backlog for work index continue to translate into higher employment in the manufacturing sector, with the employment index rising for the third consecutive month,” Ulgen added.

A faster rise in manufacturers’ purchasing activity placed further pressure on suppliers in April, futher lengthening suppliers’ delivery times. Czech manufacturers’ average input prices also continued to rise sharply in April, due to strong demand for raw materials. The rate of inflation, however, eased for the first time in seven months. Meanwhile, the pace of output price inflation was unchanged from March’s 38 month high, the report said.

“Inflationary pressures persist with both input and output prices remaining above long-term averages but the pace of increase in input prices moderated during the month for the first time in seven months,” HSBC’s Ulgen said. 

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