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Czech Manufacturing Sector Deterioration Sharply

The Czech Republic's manufacturing sector contracted sharply in March, amid a decline in production and new orders mainly due to coronavirus outbreak, survey data from IHS Markit showed on Wednesday.

The headline manufacturing purchasing managers' index, or PMI, fell to 41.3 in March from 46.5 in February. Any reading below 50 indicates contraction in the sector. The latest deterioration was the sharpest since May 2009.

Order book volumes declined sharply in March as factories shutdown and global economic uncertainty intensified. The delivery of raw materials and availability of workers were difficult in March.

The number of workforce declined at the sharpest pace since September 2009 in March, as voluntary leavers were not replaced and factory shutdowns led to greater reports of dismissal. The backlogs of work decreased at the fastest pace for four months.

The degree of confidence decreased to the lowest since April 2012. Business expectations uncertainty was driven by the impact of COVID-19, especially on the already struggling automotive sector.

On the price front, input prices rose for the second successive month in March as raw material shortages increased costs. Firms reduced their selling prices to attract the customers and remain competitive.

"Signs of progress towards stabilization seen in February were sharply reversed in March following the outbreak of COVID-19 and the escalation in the government's response," Sian Jones, Economist at IHS Markit, said.

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