*
Czech GDP +0.1% q/q after declines in previous two
quarters
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Analysts see GDP growth possible in 2023, risks remain
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Czech PMI falls deeper into contraction in April
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Polish manufacturing also deteriorates, Hungary PMI grows
(Adds Czech, Hungary PMI, further comment, details)
By Jason Hovet
May 2 (Reuters) - Improved trade helped the Czech
economy to emerge from recession in the first quarter,
preliminary data showed on Tuesday, although surveys in central
Europe showed manufacturing was weak and downside risks
remained.
Central Europe's households have been under strain from
inflation driven by food and energy prices following Russia's
invasion of Ukraine. Weakened demand and high costs are also
hitting business.
The Czech and Hungarian economies slipped into technical
recession, defined as two consecutive quarters of declining
quarter-on-quarter GDP, at the end of 2022.
Czech GDP most likely snapped its streak of contractions
with a 0.1% quarter-on-quarter rise in the first three months of
the year, defying a Reuters poll forecast for a 0.1% drop.
GDP shrank by a less than expected 0.2% year-on-year, the data showed. The statistics office did not give a breakdown but said external demand buoyed the economy while household consumption decreased. Updated data is due on May 30. The Czech central bank has forecast the economy will decline overall in 2023, but analysts said the first-quarter data showed the recession was over and raised chances of growth this year. Data from the S&P Global Purchasing Managers' Index (PMI) indicator on Tuesday also showed strong risks in global trade hung over Czech manufacturers, Jakub Seidler, chief economist for the Czech Banking Association, said. "We still have a fragile recovery. It seems the economy should grow, probably less than 1%, but given the balance of risks, this should be positive news," he said. Czech PMI fell to 42.8 in April from 44.3 in March, sinking further below the 50 mark that divides expansion from contraction. In Poland, manufacturing activity also deteriorated, according to S&P Global's Polish PMI, with orders declining and high prices hitting demand. "Since demand in the economy continues to slow down at the beginning of the second quarter, this may mean weaker GDP growth in (the second quarter)," Bank Pocztowy's chief economist, Monika Kurtek, said. Only Hungary's PMI, calculated using different methodology by the country's Association of Logistics, Purchasing and Inventory Management (MLBKT), rose last month, to 61.9, and production increased, according to the survey. The surveys follow on from industrial output figures in the region that mostly showed declines in January and February. Inflation in central Europe remains stuck at double-digit rates, and central bankers are not rushing to cut interest rates after sharp hiking cycles in 2021-22. The Czech GDP figures will inform the central bank's debate at a policy meeting in Prague on Wednesday, although no change in rates is expected. The bank has said it would not begin easing prematurely, wary of wage demands possibly picking up and driving renewed price pressures. (Reporting by Jason Hovet in Prague; Editing by Susan Fenton and Barbara Lewis)
