Industry in CEE shows signs of rebound

On the radar

• Inflation rate in Serbia eased to 4.5% y/y in May.

• Industrial output grew 3.6% y/y in Romania in April.

• Today, Serbian central bank holds a rate setting meeting.

• Apart from that, Croatia will publish producer prices for May, while Czechia, Poland and Romania will present current account data.

Economic developments

In most CEE countries, industrial output rebounded in April. Notably, in Poland, Slovakia, and Slovenia, growth was particularly dynamic, ranging from 6.3% year-on-year (y/y) in Slovakia to as much as 7.9% y/y in Poland. However, in Czechia, Hungary, and Croatia, the industry continued to contract in April, albeit at a slower pace compared to the previous month. Taking a broader perspective, we remain hopeful for a gradual recovery of the industry in the region. Despite purchasing managers’ indices (PMIs) remaining below the threshold of 50 in Czechia and Poland, and industry confidence indicators showing sideways movement, there’s a positive sign: export growth in Germany has bottomed out and appears to be slowly climbing. We interpret this as an indicator of improving prospects for the manufacturing sector.

Market developments

Today, the Serbian central bank is holding a rate-setting meeting. With inflation easing, the European Central Bank (ECB) previously cut interest rates by 25 basis points, signaling monetary easing. Currently, the key interest rate in Serbia stands at 6.5%, and we anticipate a likely interest rate cut. Meanwhile, the Hungarian forint has extended losses against the euro, as EURHUF continues to rise. The exchange rate for EURPLN is at 4.33, while EURCZK stands at 24.66. In the bond market, developments were mixed: both Czechia and Poland experienced solid demand during bond auctions on Wednesday.

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