June 1, 2020 / 8:25 AM / a month ago

Czech, Polish PMIs remain deep in red as factories wait on orders rebound

PRAGUE/WARSAW (Reuters) - The manufacturing downturn in the Czech Republic and Poland remained deep in May, surveys showed on Monday, as factories face a long slog to recover after coming out of coronavirus lockdowns.

Output slumped in central Europe after a virtual worldwide lockdown in March and April, and many plants were idled to combat the spread of the new coronavirus.

Restrictions started easing in May and factory gates reopened, but orders have not fully returned and economies face a deep recession in 2020.

In a message echoed by many firms, Czech engineering company Motor Jikov Group, part of the hard-hit car sector, said that revenue last month was about half the expected amount and that a full rebound this year was unlikely.

“Customers are postponing orders each week,” Chief Executive Miroslav Dvorak told Reuters. “We are counting... on a situation in which a return to planned sales levels will not happen before the end of the year.”

While the IHS Markit Purchasing Managers’ Index (PMI) in Poland rose to 40.6 in May from April’s record low of 31.9, it remained well below the 50 mark separating growth from contraction. In the Czech Republic, the index rose to 39.6.

In both, the fall in output and new order components were among the fastest on record.

Polish trailer manufacturer Wielton said it could still not predict how fast demand would recover. “I would like to believe the worst is behind us,” Chief Executive Mariusz Golec said.

Governments have helped with schemes to cover workers’ wages and are guaranteeing loans for companies with cash flow trouble. Business groups complain about sometimes poor access to aid.

Despite support, fears are consumers are in no hurry to buy big items with risks of growing unemployment or a second pandemic wave.

“(Manufacturers) are able to produce but no one is interested in buying,” Sonia Buchholtz, an economist at the Polish employers group Confederation Lewiatan, said.

Reporting by Jason Hovet in Prague and Alan Charlish in Warsaw; Editing by Hugh Lawson

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