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CEE manufacturing activity improves in October, but COVID blurs outlook

BUDAPEST, Nov 2 (Reuters) - Central Europe’s economies posted improved manufacturing activity in October, with employment rising, but lockdown measures and a fast spread of coronavirus infections across Europe foreshadow a slowdown.

The Czech and Polish governments have imposed tough restrictions to curb the spread of the second wave of the pandemic. But the region -- home to many Western European car plants -- has not seen factory closures so far, which offers some hope, analysts said.

Hungary’s seasonally adjusted Purchasing Managers’ Index HUPMI=ECI rose to 50.1 in October from a revised 48.7 in September, with new orders and employment indices increasing.

Poland’s IHS Markit’s Purchasing Managers’ Index was 50.8 in October, stable from September but below the 51.1 forecast by analysts in a Reuters poll. Output growth slowed as new orders declined, mainly hampered by subdued Polish domestic demand.

Consumer sentiment has also been worsening in Hungary for months.

“The PMI numbers may send some rays of hope, but we are far from being out of trouble,” said Peter Virovacz, an analyst at ING in Budapest.

“Sooner or later Hungary cannot avoid further restrictions either (due to rising infections) ... and then problems could also emerge in production chains.”

Czech manufacturing sentiment improved more than expected in October as output and new orders increased. The headline PMI reading rose to 51.9 in October from 50.7 in September.

A surge in new COVID-19 infections in the Czech Republic, the fastest in Europe per population size, has brought in new government restrictions on business and movement.

However, unlike in the spring, few industrial companies -- a large chunk of the export-oriented economy -- have halted production so far. The same is true for Poland and Hungary.

“The restrictions introduced in the country and abroad ... concern part of the service sector, and the available information does not indicate that production plants are to be closed,” Bank Millennium said in a report. (Reporting by Krisztina Than, additional reporting by Marcin Goclowski in Warsaw; editing by Larry King)