By Marcin Goettig
WARSAW (Reuters) - Central European manufacturing continued to grow in March as a jump in Polish factory activity managed to offset slower growth from Germany, the region's main trade partner.
The former communist countries of the European Union's eastern wing rely on demand and investment from richer western Europe, which over the past two decades has lifted their living standards.
But as the euro zone growth remains weak, central European countries have begun diversifying their exports and taking measures to boost domestic consumption, to keep their economies on a growth path.
"The big picture ... is that the PMIs suggest that manufacturing activity in central Europe remains strong," Capital Economics said in a note.
Manufacturing in Poland, the region's largest economy, expanded at the fastest rate in eight months in March, driven by quicker growth in new orders, output, exports and employment, Markit said on Friday.
Poland's manufacturing Purchasing Manager's Index rose to 53.8 last month from 52.8 in February, Markit said on Friday. The figure exceeded all 15 forecasts from analysts polled by Reuters.
In the Czech Republic, the manufacturing PMI eased to 54.3 in March from 55.5 in February, still above the 50 level that separates growth from contraction.
Also in Hungary, where the PMI index is calculated under a different methodology, the index fell to 51.7 in March from a revised 54.6 in February, suggesting a possible slowdown in German industry.
Demand from the euro zone accounts for about 60 percent of Czech, Hungarian and Polish exports, and a German PMI showed on Friday that its manufacturers ended their weakest quarter in more than a year in March, a sign Europe's biggest economy may be feeling the pinch from a global slowdown.
"The fact that the Polish PMI rose further supports our view that it will be one of the best performing economies in the region this year," Capital Economics said in a note.
Poland's $480 billion economy expanded by 3.9 percent year-on-year in the fourth quarter, and economists expect it to grow 3.6 percent in 2016, helped by its new government's increase in public spending.
Poland's ruling party on Friday began a new child benefit program valued at about 1 percent of GDP this year, which will be financed by one of European Union's highest bank asset taxes.