KBC Market Research Desk
KBC Bank
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PMI indices show that business sentiment in Poland and the Czech Republic worsens
On Friday, a flash estimate of the Polish inflation for April surprised both us and the market negatively. The headline inflation came out at -1.1% Y/Y and deflation has therefore deepened last month. Although in our base scenario we expect the central bank will keep rates unchanged, it may still be interesting to watch the outcome of this week’s meeting of the National Bank of Poland (on Friday).
Apart from the lower inflation, it is likely that members of the Polish Monetary Policy Council will also discuss weaker than expected data on industrial production for March. The case for such discussion may be even stronger due to the fresh PMI figures in manufacturing which also came out below market expectations and hit three-month lows in April. Month-on-month decline in the sentiment was driven by both current business conditions and new orders components of the index. Regarding the employment sub-index, it showed further improvement in conditions but the pace of growth was the slowest since the autumn 2014.
Regarding the Czech PMI, the index hit a sixteen-month low in April. Although conditions in industry remain favourable (the headline index reached 53.6 points), it showed decline in the fourth consecutive month. The most worrying probably was only tepid pace of growth of new orders. On the other hand, demand for new workers remains strong which is a good sign from the perspective of the central bank which expects relatively fast wage growth.
| Currencies | % chng | |
| EUR/CZK | 27.05 | 0.0 |
| EUR/HUF | 311.7 | 0.2 |
| EUR/PLN | 4.37 | -0.7 |
| EUR/USD | 1.15 | 0.9 |
| EUR/CHF | 1.10 | 0.2 |
| FRA 3x6 | % | bps chng |
| CZK | 0.25 | -3 |
| HUF | 0.87 | -1 |
| PLN | 1.64 | 1 |
| EUR | -0.26 | 1 |
| GB | % | bps chng |
| Czech Rep. 10Y | 0.50 | 2 |
| Hungary 10Y | 3.38 | 6 |
| Poland 10Y | 3.09 | 1 |
| Slovakia 10Y | 0.87 | 4 |
| CDS 5Y | % | bps chng |
| Czech Rep. | 41 | -1 |
| Hungary | 144 | -1 |
| Poland | 85 | 0 |
| Slovakia | 42 | 1 |
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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