Recent available manufacturing data paints a somewhat rosy, yet more complicated picture for manufacturing in CEE. Hungary, Czechia, and Poland have all made significant progress, though Romania’s manufacturing base is still shrinking. The results for November indicate a positive trend in manufacturing Purchasing Managers’ Indices (PMIs) for most countries in the region, highlighting an overall upswing in market sentiment.
Hungary had a Manufacturing PMI of 53.4, which indicates expansion and is above the all-important boom/bust line of 50. This positive reading for PMI indicates that manufacturing activity is expanding, supported by higher production capacity and a growth in new orders. The positive momentum in Hungary contrasts sharply with the situation in its neighbors, particularly Czechia and Poland, where PMIs remain in contractionary territory.
Czechia and Poland’s Manufacturing Challenges
Czechia’s Manufacturing PMI stays pinned in the contractionary territory. That said, new export sales have experienced a remarkable comeback. This increase is welcome news indeed, especially in light of many other continued challenges in the industry, but it’s not all rosy. Even though there seems to be great new activity in exporting, the general PMI number shows that manufacturing is still struggling significantly.
Likewise, Poland’s Manufacturing PMI is firmly in the contractionary zone, even as it recently reported an increase in new export business. Against this dismal economic backdrop, Poland’s central bank today began its two-day rate-setting meeting. Analysts are eager to see how all of these factors will shape Federal Reserve monetary policy in the future.
Romania’s Continued Decline
Romania’s Manufacturing PMI fell to 47.2 in November, decreasing from 47.6 in October. Compared to the positive job growth enjoyed by their regional counterparts, this decline is telling. Romania’s industrial base, though once larger than the current one, is going through a long period of decay. This decline is characterized by large declines in production and new orders. Last month’s overwhelming downward momentum has not slowed down this month, continuing to push downward. This trend should worry anyone concerned about the long-term health of the nation’s manufacturing economy.
According to some market analysts, Romania’s manufacturing sector continues to struggle. In turn, fiscal and regulatory market sentiment in the country has soured. Even as other CEE nations are enjoying economic upswings, Romania’s long-term downward trend spotlights real underlying economic issues that must be tackled.
Regional Sentiment Improvement
On the opposite side of Romania’s downturn, market sentiment across the much wider CEE region has improved markedly during November. Judging strictly by economic indicators, Hungary, Czechia, and Poland are back with a vengeance. That recovery is being driven by a booming export market and steady production. The Polish zloty has appreciated modestly against the euro in advance of the central bank’s decision. As such, this movement signals renewed investor confidence in the broader economic outlook for the region, with the sole exception of Romania.