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Czech Manufacturing Slows Amid Rate Reductions, PMI Shows

Oct. 1 (Bloomberg) -- The Czech Republic’s manufacturing performance worsened for a sixth month in September on declining new orders, an industry gauge showed after the central bank cut interest rates to a record low.

The HSBC Czech Republic Manufacturing PMI fell to 48, from 48.7 in August, the bank said today in an e-mailed report. A result greater than 50 signals an improvement in performance, while a figure below signals deterioration.

“Output declined at the fastest rate in over three years, while demand from both domestic and export markets remained weak,” the bank said in the report compiled by Markit, a financial information services company. “New orders have declined for six successive months, though the rate of contraction stabilized after accelerating in both July and August.”

The central bank in Prague cut the benchmark interest rate to a record-low 0.25 percent on Sept. 27 as weakening domestic demand pushed the economy into the second recession in three years. Gross domestic product contracted for three quarters through June as households cut spending in response to a worsening economic outlook across Europe.

The economy relies on demand for cars, auto parts and electronics goods from the European Union, the market for about 80 percent of its exports. The government wants to push through a package of measures including tax increases that the central bank forecasts will further depress domestic demand next year.

“Policy makers seemed to have exhausted their response options,” Agata Urbanska, a London-based economist at HSBC, said in the statement. “Eyes need to be fixed on the fiscal policy side and the future of the vetoed pension-system reform and fiscal austerity measures debated in the parliament at present.”

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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