CEE: Will PMIs deteriorate further?

On the radar

• Flash inflation in Poland landed at 4.1% y/y in June, while in Slovenia at 2.2% y/y.
• Producer prices in Hungary eased to 6.9% y/y in May.
• Retail sales grew by 2.6% y/y in May in Croatia and by 5.6% y/y in Serbia
• Industrial output increased by 1.7% y/y in May in Croatia and by 4.4% y/y in Serbia.
• Trade deficit in Serbia reached EUR 562.3 million.

Economic developments

On Tuesday morning we will get to see June’s manufacturing PMI indicators that deteriorated mostly in May. It is to be seen if that trend has prevailed in June. Looking at other market sentiment measures such as the Economic Sentiment Indicator (ESI) suggests further deterioration of economic conditions. The average value of ESI for the region declined further in the second quarter. More worryingly, the average ESI in 2Q25 was the lowest in roughly two years. The high level of uncertainty persists. While the end of the 90-day pause in tariffs is approaching, it is still not clear whether the deal between the US and the EU will be reached and in what form (at this point EU is willing to accept 10% tariffs but looking for exceptions for key sectors such as pharmaceutical or automotive). Trade war, however, translates into considerable downward risks for economic activity in the remainder of the year and beyond.

Market movements

EURPLN holds close to 4.24 while EURHUF went below 400 level as EURUSD keeps moving higher. Apart from Poland, we have seen long-term yields declining at the beginning of the week. Poland returned to the green bond market with offer of EUR 1.2 billion of 12-year green notes alongside EUR 1.75billion of regular seven-year euro bonds. Romania keeps delivering the measures aiming to reduce the budget deficit that widened to 3.4% of GDP at the end of May according to the Ministry of Finance. Romania sold RON 640 million of 2028 government papers on Monday that were priced to yields 7.31% on average.

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