CEE: PMI in Czechia moves into expansion territory

On the radar

• In June, manufacturing PMIs declined in Poland and Hungary, while in Romania it went up marginally. In Czechia PMI increased above the threshold of 50.
• Flash inflation in Croatia landed at 3.7% y/y in June.
• Unemployment rate in Romania was published at 5.8% while producer prices rose by 0.9% y/y in May.
• Today, Poland’s central bank will announce rate decision.

Economic developments

After Economic Sentiment Indicator, we look at the manufacturing PMI developments that were released yesterday. Starting with very good news, manufacturing PMI increased in Czechia in June and landed above the threshold of 50 for the first time in three years. May 2022 was the last time when manufacturing PMI in Czechia was above 50. According to the statement, Czechia experienced the sharpest increase in production since February 2022. Furthermore, renewed expansion in new orders boosted business confidence. Czechia, next to Croatia and Poland, outperformed in the first quarter of 2025 and the GDP growth is expected to be solid this year. In Poland, however, the decline of manufacturing PMI in June was surprisingly sharp as the index landed at 44.8. Polish PMI index disappointed already in May and we see continuation of that trend. The decline in new orders led to the steepest drop in output in over two-and-a-half years and the outlook for production weakened. Finally in Romania, June brought the third consecutive month of improvement in the index, with the figure at 48.7 reaching one-year high. New orders and output had a negative contribution to the index that remains in the contractions zone (below the threshold of 50).

Market movements

Today, Poland’s central bank will announce interest rate decision, and we expect stability of rates at 5.25%. More interestingly, a new inflation and growth projection will be presented. Inflation will most likely land in the central bank’s target within the projection horizon. Recent geopolitical developments (leading oil price increases) were cited as argument against the hasty easing. Therefore, we expect interest rate cuts to be postponed until autumn. We also expect budget risks to weigh on monetary easing in Poland. The Hungarian forint and the Polish zloty remain relatively strong against the euro as trade flows support lower EURHUF and EURPLN levels, in particular. The Czech koruna also gained supported additionally by solid PMI release and improving economic prospects. Long-term yields are marginally lower this week everywhere but Poland.

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