CEE: PMIs improved with concern over rising input prices

Erste Bank Research Team Erste Bank

On the radar

Manufacturing PMI Indices increased in Czechia, Poland and Romania in March.
In Hungary, local manufacturing PMI Index declined to 50.4.
Unemployment rate in Romania remained flat at 6.0%.
Today, producer prices are due in Romania (8 AM CET).

Economic developments

Despite the war in Iran, market sentiment improved in March across the region. Although manufacturing PMI indices remain below the threshold of 50 in Poland and Romania, they increased to 48.7 and 46.6, respectively. This suggests that the bottom may have been reached in February, conditional on further improvement. Economic momentum has remained strong in Czechia, with the PMI rising to 52.8 in March. Czechia’s manufacturing sector is therefore in the expansion zone, and, importantly, year ahead expectations were buoyant. The fact that Germany’s manufacturing PMI also increased and has stayed above 50 for the second consecutive month could support market optimism, especially given global developments and elevated uncertainty. While output and new orders both saw stronger rates of growth, German manufacturers faced a surge in cost pressures and supply chain disruptions linked to the war in the Middle East in March. Regarding expectations, German manufacturers were significantly less confident about growth over the next year than they were before the outbreak of the war in Iran. Finally, rising input prices and the resulting increase in production costs remain a common concern across the region.

Market movements

President Trump delivered a speech in which he warned that the US would hit Iran “extremely hard” in the coming weeks. As prospects for resolving the conflict diminish, oil prices have risen in response. Brent crude reached USD 107 per barrel on Thursday morning. In Poland, new fuel price caps take effect. The Ministry of Energy currently sees no need for fuel consumption restrictions but is prepared to act if necessary. In Czechia, the year to date budget deficit widened, while Romania reduced its April bond issuance plan. The Ministry of Finance announced it intends to raise RON 3.1 billion, half of the March issuance volume. Romania faces roughly RON 23 billion in debt service obligations in April. According to one of the latest Hungarian polls, the opposition led by the Tisza party has expanded its lead to 19 points among decided voters, with Tisza polling at 56% versus 37% for Fidesz.

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Erste Bank Research Team

Erste Bank

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