Emerging Europe Losing Steam
Don’t Blame Ukraine
July 2, 2014
Weighted manufacturing PMI for emerging Europe, including the Czech Republic, Hungary,and Poland fell to 51.6 in June from 52.8 in May, data constructed by Capital Economicsshow.
Specifically, the Polish PMI fell for the fourth month to 50.3 from 50.8 in June. The Czech PMI came in at 54.7 from 57.3 in May. Hungary’s PMI dropped to 51.5 from 52.8.
It is not due to the ongoing crisis in Ukraine. Blame Germany instead, according to analystWilliam Jackson:
While the fall in the Central European PMIs could be blamed on concerns about contagion from the crisis in Ukraine, we think a more likely explanation is the recent softening of the data from Germany. After all, Central European manufacturers are deeply integrated into German supply chains, but their trade ties with Ukraine and Russia are small.
All in all, then, the data suggest that the recovery in Central Europe has lost some steam in Q2 and it seems that the second half of the year is likely to prove more challenging for the region. But, by the same token, the latest data are by no means a disaster.
Meanwhile, Turkey’s PMI fell to 48.8 from 50.1 in May, the weakest reading since August 2011 and “provides further evidence that the strong growth seen in the first quarter of this year is unlikely to last.”
The iShares MSCI Poland Capped ETF (EPOL) lost 0.3% this year. The iShares MSCI Turkey ETF (TUR) gained 16%.