By Marcin Goettig
WARSAW (Reuters) - Growth in Poland's manufacturing sector unexpectedly fell to a 7-month low in May, signalling a possible soft patch in central and eastern Europe's largest economy as it diverged from a pick-up in the Czech Republic and Hungary.
Poland's HSBC manufacturing PMI fell to 52.4 in May from 54.0 a month before, data showed on Monday, in a reading that fell short of all the forecasts of sixteen economists' polled by Reuters.
Both output and new orders rose at their slowest pace since October last year, with new export business also slowing down.
"This is a warning sign and the weakening is partly due to the situation in German industry" said Rafal Benecki, chief economist at ING Bank Slaski. "Poland's economy may slow in the second quarter, but should pick up again in the second half."
The slowdown in Poland, which followed a seasonal pattern from previous years and reflected a fall in German PMI indexes, contrasted with an acceleration elsewhere in central and eastern Europe.
In Hungary, where the manufacturing PMI is calculated using a different methodology, the index jumped to 55.1 in May from a revised 51.2 in April, posting the highest May reading in 15 years.
The uncertainty regarding presidential elections could have weighed on the Polish PMI index in May, said Jaroslaw Janecki, a Warsaw-based economist at Societe Generale (PARIS:SOGN).
Socially conservative challenger Andrzej Duda, who champions lowering of the retirement age and higher taxes on banks and supermarkets, won Poland's presidential elections in May.
The result of the vote signals that the ruling Civic Platform (PO) party, viewed by markets as pro-business, may lose the autumn parliamentary elections, ending its unprecedented eight years in power.
CAR MAKERS SHINE
In the export-reliant Czech Republic, the manufacturing PMI beat expectations, rising to 55.5 in May from 54.7 in April as output, new orders and employment all picked up pace.
Skoda Auto, a unit of Germany's Volkswagen (XETRA:VOWG) and the Czech Republic's largest exporter, sold a record amount of cars in the first quarter, showing a 7 percent increase. The company, which sold more than 1 million cars in a year for the first time in 2014, is a bellwether for the Czech economy.
Analysts said that the main growth driver in Hungary was also the auto industry that benefited from a rise in demand in Western Europe.
Poland's economy is more than twice as big as the Czech one, but its car sector is smaller. Poland-based car makers, which include Skoda, Toyota, General Motors' Opel and Ford, produced a total of about 580,000 cars and trucks last year.
Data last week showed that the Polish economic growth accelerated to 3.6 percent year-on-year in the first quarter from 3.3 percent in the last quarter of 2014.
However, domestic demand growth slowed to just 2.6 percent from 5.0 percent due to a fall in the level of stocks, while exports remained strong.