Sentiment indicators send mixed signals

On the radar

• January’s inflation in Croatia increased to 4.0% y/y.

• Producer prices in Romania declined by -0.7% y/y in December.

• Today at 10.30 AM CET Slovenia will publish trade balance.

Economic developments

Sentiment indicators have been sending mixed signals about economic recovery most recently. Manufacturing PMI indices went up in Czechia and Poland in January, while in Hungary and Romania they dropped compared to December. Czechia reported slower falls in output and new orders in January. Poland also experienced slower deterioration in business conditions and improving confidence in the outlook for production. In Romania, on the other hand, production volumes fell at quickest rate on record. The Economic Sentiment Indicators (ESI) across the region suggest more pessimistic development as ESI declined in all CEE countries. Most notably in Slovakia and Serbia. Currently, the average value of ESI indicator for the region is as low as it was at the end of 2023. More worryingly, the downward trend has been present for couple of months already. We keep seeing weak external environment as a key risk to the downside to our current growth forecasts in CEE.

Market movements

CEE currencies have weakened against the euro at the beginning of the week. EURCZK is at 25.20, EURHUF holds close to 408 while EURPLN moved up to 4.23. The bond market has been quite stable. Romania took advantage of the recent decline of long-term yields and finally tapped international bond market. It has issued EUR 2.8 billion in euro-denominated bonds with maturities of five and nine years. Furthermore, it sold USD 1.25 billion of 12-year US dollar bond. Poland was also active and sold PLN 1.76 billion of T-Bills.

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