The headline HSBC Poland manufacturing PMI remained below the 50 mark that separates contraction from expansion for the 7th consecutive month in October, Markit data showed.
At 47.3, the PMI improved marginally from September’s 38-month low of 47 but it was still the second-lowest in the current sequence of below-50 readings, Markit said in a statement.
New business volume contracted for the ninth consecutive month, with export markets the key source of weakness, posting the fastest drop since May. Manufacturing employment declined at the fastest rate since October 2009.
“The new export orders fell to a 40-month low in October,” Agata Urbanska, economist, Central and Eastern Europe at HSBC, said in a statement accompanying the release of the data. “These imply more weak industrial production and employment data releases in the remainder of the year with both production and employment growth most likely in a negative territory.”
The data adds to pressure on the Polish central bank to ease monetary policy.
“Polish consumer sentiment is also now at 2009 lows, with the message remaining very clearly for a rate cut next Wednesday (we now expect a shift in market talk from timing to actual size of cuts this year),” Simon Quijano-Evans, EMEA emerging markets strategist at ING, said. In the Czech Republic, business conditions also declined for the 7th month in a row in October, with Urbanska pointing to German data such as the PMI and Ifo index surprising on the downside and “highlighting more downside risks to manufacturing and export orders in the Czech Republic in the last quarter of the year.”
TURKEY, RUSSIA UP
By contrast, Turkey’s PMI outperformed, rising to 52.5 last year, the strongest in a year and up from 52.2 in September.
The rise was driven by higher new orders from both domestic and export markets. The rate of job creation accelerated for the third successive month to the sharpest since April, the data showed.
The figure “provides early hopes that, while industrial production disappointed in July and August, the economy may have ended Q3 and started Q4 on a more positive note,” William Jackson, emerging markets economist at Capital Economics, said.
Noting that the Turkish new export orders component was the only one in the region to rise in October, Jackson mentioned the resilience of external demand, with Turkey benefiting from trade ties to the Middle East and North Africa, which offset the impact of the eurozone slowdown.
Price rises may be a risk for Turkey’s inflation, as the data showed cost inflation accelerating further.
“On the inflation front, rising global commodity prices and the impact of domestic administered price hikes are likely to be felt in the remainder of the year,” Melis Metiner, economist at HSBC, said.
In Russia, the HSBC manufacturing PMI increased for the second month running to a reading of 52.9 in October, higher than the survey average of 52.1 and signalling the best overall operating conditions faced by Russian goods producers in five months, according to Markit.
Behind the increase was strong domestic demand, with the volume of new work received rising for the 13th successive month and at the sharpest pace since March 2011 but with a slight fall in new export orders, the data showed.