CEE: July’s PMI releases differ across the region

On the radar

• PMIs for July were released on the 1^st of August at 49.7 in Czechia, 50.7 in Hungary, 45.9 in Poland and 48.4 in Romania.
• Inflation in Croatia landed at 4.1% in July, higher than expected.
• Today, flash inflation will be released in Czechia at 9:00.

Economic developments

On Friday, the PMI data were released for Czechia, Poland, Romania, and Hungary. Czechia reported a negative surprise, with the July PMI falling to 49.7, below the market expectation of 50.2 and shifting into contraction territory. In Poland, the PMI showed a modest recovery, rising to 45.9 from June’s 44.8. This follows consecutive declines in May and June that had pushed the index deep into contraction from April’s 50.2 points. The July improvement was broad-based, with gains across all five subcomponents; however, four of them continued to contribute negatively overall. Despite the uptick, the index remains the second-lowest reading since mid-2024. Romania’s headline PMI edged down to 48.4 in July from 48.7 in June, which had marked a one-year high. The slight decline reflects the impact of recently announced domestic fiscal consolidation measures and weaker external demand. The index has now remained in contractionary territory for thirteen consecutive months. Hungary’s PMI rose to 50.7 in July, up from 48.9 in June. However, it is important to note that Hungary’s PMI is calculated using a different methodology, making direct comparisons with other CEE countries inappropriate.

Market movements

CEE currencies rebounded on Friday, recovering a significant portion of their losses from the first half of the week. The main catalyst for Friday’s move was a weaker-than-expected U.S. jobs report, which increased the likelihood of a rate cut in September. This led to a 1.5% correction in the USD against the euro, following a nearly 3% w/w rally. This week, monetary policy meetings are scheduled in Czechia, Serbia, and Romania, with no rate changes expected. Several members of the Czech National Bank’s Monetary Policy Committee have explicitly ruled out supporting a rate cut, citing factors such as improved consumer sentiment, elevated inflation, limited risks from U.S. tariffs, and the current policy rate being close to neutral.

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