EEC ECONOMY-Polish and Hungarian manufacturing sentiment improves in October

November 2 (Reuters)Manufacturing sentiment in Poland and Hungary recovered slightly in October, data showed Tuesday, even as rising costs and supply chain disruptions continue to hamper Central Europe’s economic recovery .

IHS Markit’s Purchasing Managers Index (PMI) for Poland fell to 53.8 from 53.4 in September, defying expectations of a slight dip and staying well above the 50 line separating expansion and contraction.

Hungary’s PMI, published by the Logistics, Purchasing and Inventory Management Association (MLBKT), rose to 53.1 in October, from a revised 52 in September.

The readings come a day after the Czech PMI, also from IHS Markit, slowed to an 11-month low of 55.1.

Manufacturing sentiment hit record highs in Poland and the Czech Republic in mid-year, but has since cooled as global supply issues – more evident with the semiconductor crisis hitting the auto industry – reduced growth.

Consumer inflation in the region has skyrocketed more than in other European markets, as shortages and soaring energy prices mix with tight labor markets and rising wages.

Central banks have raised interest rates and investors are focusing on this week’s Polish and Czech central bank meetings on how they could further tighten their political outlook.

Analysts have warned of a period of low growth and high inflation.

“These concerns continue to weigh on the confidence of Polish manufacturers, although expectations overall remain in positive territory,” said Paul Smith, chief economic officer at IHS Markit.

The Hungarian PMI showed an increase in production and orders, but also increasing delivery times. The Polish survey also indicated an increase in production and orders, although growth was affected by lower foreign demand and supply chain issues.

Jakub Rybacki, an analyst at the Polish Economic Institute, said the survey showed companies had reported numerous material supply issues.

“Therefore, we expect weaker industrial production growth in the fourth quarter.”

(Reporting by Jason Hovet in Prague and Anna Wlodarczak-Semczuk in Warsaw; editing by Ramakrishnan M.)

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Laura T. Thrasher