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2014 Media Kit

East EU trade balances improve, Czech jobless jumps

By: | at 07:00 PM | International Trade  

November trade data from Hungary, Romania and Slovakia beat market forecasts, but a jump in Czech unemployment and prices signalled the potential headwinds to growth for governments implementing austerity measures.

The data confirmed the trend of a double-digit surge in manufacturing sales to Germany, emerging Europe’s biggest market, and led many economists to temper their forecasts for a slowdown in growth at the start of next year.

Hungary, struggling to climb back to growth following years of austerity measures that have eroded household spending, posted a much better than expected 651.5 million euro trade surplus in November, helped by a 20.2 percent rise in exports.

Neighbouring Slovakia also beat market forecasts with a 67 million euro surplus, helped by a 20.6 percent export rise. Output data also showed industrial activity expanded by 17.3 percent in November.

Romania, which once ran a vast trade gap that led to a financing crisis and an international bailout in 2009, saw its trade deficit narrow 3.5 percent from a year earlier to 8.6 billion euros.

All three countries also showed very strong import growth, which is usually due to high demand from factories producing finished goods that are sold on to other countries.

Some analysts pointed out that the growth was heavily dependent on demand in Germany, where data showed the trade surplus narrowed on an import gain, suggesting German consumers were becoming more confident.

“Clearly, we are continuing to surf on the German mini-miracle but our exposure to the economic cycle and recovery there remains huge,” said Gyorgy Barta, an analyst at the Central European International Bank.

“The news is, of course, positive from a growth perspective. Nevertheless, we still expect a smaller contribution from net exports in 2011.”

The region’s currencies shrugged off the data, instead weakening on debt worries in the euro zone periphery. The Hungarian forint , seen as the region’s most vulnerable unit, weakened most and was down 0.65 percent on the day at 0940 GMT.

Czech Jobs
Following last week’s strong December purchasing managers index (PMI) figures gauging sentiment among producers, most economists now expect the European Union’s eastern wing to post strong first-quarter growth instead of their previous forecasts for a slowdown.

But some clouds remain.

In the Czech Republic, where the government has introduced an austerity package to cut the public sector wage bill by 10 percent, extend tax hikes and halt infrastructure payments, unemployment jumped a full percentage point to 9.6 percent in December.

The Labour Ministry said the rise was due to the growing number of small business failures as consumers’ purchasing power drops and tougher rules on claiming unemployment due to take effect in January, which prompted more people to register as jobless last month. The figure was near a peak hit in February last year.

“The main source of the unemployment is without any doubt government policy - the decrease in overall wage levels,” said Pavel Mertlik, chief economist at Raiffeisenbank Prague.

Czech consumer prices rose 0.5 percent in December from November, other data showed. It was the largest monthly rise since last January and above market expectations, and brought the annual inflation rate for 2010 to 2.3 percent.

Analysts said the data could potentially push forward the central bank’s assumptions for the timing of its next rate hike. Most analysts expect the Czech central bank to raise rates from a record low 0.75 percent in the second half of this year, and the bank could move sooner in that half rather than later if prices keep climbing. (Reuters)