PMIs improve in August, but remain in contraction territory

On the radar

• Industrial output grew by 1.7% y/y in Croatia in July.

• In Serbia, 2Q24 final GDP reading landed at 4.0% with private consumption accelerating by 4.8% year-on-year.

• In Romania PPI Index arrived at 2.6% y/y

• In Hungary the 2Q24 GDP was confirmed at 1.5% y/y (-0.2% q/q) driven by private consumption (up by 4.2% y/y).

Economic developments

Although the manufacturing PMI indices remain below the threshold of 50 in all CEE countries, August brought an improvement in market sentiment in Czechia, Poland, and Romania as the PMIs inched toward 46.7, 47.8, and 48.4, respectively. Moreover, the manufacturing PMI in Czechia reached the highest level in two years, which we see as encouraging. Such developments come in contrast with Germany, where the manufacturing PMI dropped further in August to 42.4, reflecting underlying structural weaknesses of the entire sector. The PMI index in Hungary arrived at 47.6 but, due to different methodology, cannot be directly compared with other CEE countries. It is also worth noticing that the improvement of PMIs is in line with better sentiment in the industry sector, according to the Economic Sentiment Indicator surveys. The assessment of the situation has also improved further in the two months of the third quarter, and it is almost as good as it was at the beginning of 2023. The composite Economic Sentiment Indicator has also increased in most of the region.

Market developments

Hungary opened the books on a Samurai bond sale in four parts. The sale follows the announcement that EUR 500 million could still be sold in the autumn of 2024, despite Hungary getting close to the limit of the share of foreign-denominated bonds in total debt, which is set at 30%. In Czechia, the year-to-date budget deficit narrowed to CZK 175.8 billion, the lowest in roughly five years. Romania sold 2027 and 2032 bonds worth RON 495.2 million and RON 450 million, respectively, on Monday. The amount sold was below the targeted one. In Poland, the central bank began its two-day rate-setting meeting, with the interest rate decision due Wednesday. Both the FX market and CEE bond market were stable on Monday.

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