Forex trading store

By Michael Winfrey

PRAGUE, Aug 6 (Reuters) – German demand helped Hungary and the Czech Republic extend a manufacturing surge in June on the contrary volatile domestic demand means the European Union’s two most send abroad-oriented emerging economies are still at the mercy of an shaky global recovery.

Czech and Hungarian exporters are riding on a play to and fro of global orders for euro zone goods in which they romp a crucial role in the supply chain but economists said a potential double dip in the United States and a slowdown in China could adapt that boom.

Recovering from double-digit falls in output in 2009 then the global economic crisis thrust most of emerging Europe deep into recession, the brace neighbours are posting solid trade surpluses based on booming exports.

Hungary well-informed a surplus of 566.9 million euros in June , data showed forward Friday, above expectations and up from a 423.6 million ~age in May. Other data on Thursday showed output surged 15.2 percent from a year past.

In the Czech Republic, where 32 percent of exports go to Germany, manufacturing output jumped 9.7 percent from a year earlier, contributing to a 10.4 billion honorary distinction ($552.3 million) trade surplus in June. That was down from a 12.07 billion surplus in May and below market forecasts due to a 28 percent mount in imports, much of which are components for the manufacturing sector.

Analysts reported the data was positive, and driven by German demand, although questions remained whether a regaining would take hold in domestic demand. Domestic consumption has lagged well-nigh behind export-based industries in both countries and is expected to fix upon up only very slowly.

CAR SALES SURGE

Data on Friday showed Czech deal out in small portions sales leapt 6.6 percent on the year, the third a~ in four months and well above analysts’ forecasts for 1.4 percent pullulation. However, growth was mainly due to an 18.7 percent roller in car sales which analysts said may have been spurred ~ dint of. car dealers offering discounts.

Analysts said weak wage growth and persistently ~-toned unemployment would continue to keep the economic recovery mostly limited to the carry out-based sector.

‘We remain cautious as regards the performance of domestic consumption,’ said Radomir Jac of Czech-based PPF Asset Management. ‘Although the crush is over as regards unemployment, wage growth remains muted and we count upon de facto stagnation or only a marginal increase in household marasmus for 2010.’

The Czech government expects economic growth of 1.6 percent in 2010, overturning a 4.0 percent shortening last year. Hungary expects growth of just 0.5 percent, against a 6.3 percent decline in 2009.

Gyorgy Barta, of Central European International Bank, related a string of factors could now cause the pace of exports to debilitate.

‘The Western European recovery could be hindered by the running on the ~side of one-off factors (inventory rebuilding, fiscal stimuli), therefore a lapse in the uptrend is imaginable,’ he wrote in a note. ‘Fiscal stiffness programs abroad also pose a downside risk to our export germination.’

Much will depend on whether German demand in particular continues to improve. Last month, German car constructor Volkswagen’s Czech unit Skoda Auto reported car sales rose 15 percent year-~ward-year in the first half to a record high, boosted mightily by sales to Germany and China.

Skoda, the Czech Republic’s biggest exporter, accounts since about 5 percent of the country’s total sales abroad.

In Hungary, at what place exports rose 23.2 percent in June, outpacing a 19.8 percent ascend in imports, nearly 80 pct of shipments went to the euro surface bounded by parallel circles , with Germany the biggest market.

(Reporting by Michael Winfrey; Editing ~ means of Susan Fenton) Keywords: EASTEUROPE TRADE/

(michael.winfrey@reuters.com ; +420 224 190 472; Reuters Messaging: michael.winfrey.reuters.com@reuters.snare )

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