The PMI numbers show different developments

On the radar

• The inflation rate in Poland rose to 4.9% year-on-year in September.

• In Slovenia, inflation fell to 0.6% year-on-year in September.

• Manufacturing PMI indices in September were 46 in the Czech Republic, 49.7 in Hungary, 48.6 in Poland and 47.3 in Romania.

• Today at 11am CET Croatia will release a flash estimate of inflation for September.

Economic developments

Today we delve deeper into market sentiment developments as the September PMI indices have been released. The manufacturing sector remains in the contraction zone as the manufacturing PMI indices continue to fall below the 50 threshold. In Romania (September PMI index at 47.3), demand remains weak, as shown by the development of the new orders component, which also negatively affects production and employment. Foreign demand remains weak and, more importantly, the German economy shows no signs of recovery. In Poland and Hungary, PMI indices delivered a positive surprise as they were higher than the market expected. In Poland, the footprint was the second highest in over two years as production and new orders fell more slowly. However, in the Czech Republic, the PMI index fell to 46 in September. Weak external conditions continue to be a major constraint on the performance of domestic factories. Nevertheless, the trend of the three-month moving average in the Czech Republic and Poland looks quite promising, as it has recently trending upwards over time, in contrast to Germany, where the manufacturing PMI peaked in the second quarter and has been falling since then. In Romania, however, the development of the three-month moving average mirrors that of Germany.

Market developments

Today the Polish MPC begins its two-day meeting to set interest rates, and the interest rate decision is scheduled to take place on Wednesday. September’s flash inflation estimate on Monday showed the overall figure rising to 4.9% year-on-year due to unfavorable base effects. Although the increase was relatively significant, it was expected and should have little influence on the central bank’s decision. If anything, it supports the scenario of interest rate stability, and that is what we expect in Poland at the upcoming meeting. Romania successfully placed 2038 government bonds worth RON 500 million on the market, amid very strong demand as the bid-to-cover ratio was above 4. At the same time, Romania offers Samurai bonds with terms between 3 and 20 years. In Hungary, Prime Minister Orban announced that Hungary wanted higher growth and lower interest rates, but that there was respect for the independence of the central bank. Long-term yields fell slightly at the start of the week, while CEE currencies were slightly weaker against the euro.

Download full CEE macro daily