Czech manufacturing new orders dropped sharply in May contributing to “the greatest overall worsening in business conditions in the goods-producing sector since August 2009,” an industry gauge said Friday.

The Czech manufacturing sector continued to record strong expansion at the start of the second quarter, the HSBC Czech Republic Manufacturing 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.

Domestic demand is driving an increase in manufacturing performance in the Czech Republic, with the HSBC/Markit Purchasing Managers’ Index (PMI) for the Czech Republic hitting a new record in January, showing that trends at the end of 2010 are continuing. The growth is also leading to an increase in inflationary pressures, as commodity prices rise.