April 30 (Reuters) - Hungary's economy expanded in the first quarter while Czech gross domestic product (GDP) increased at its fastest quarterly rate in two years, according to preliminary data releases on Tuesday showing a recovery gaining its footing.
Central Europe's economies are looking to shake off an inflation surge that hammered consumer activity last year, hoping renewed spending powers will compensate for factory activity that remains muted as order books have shrunk.
Policymakers are watching to see how quickly real wage growth picks up and gives a lift to household spending now that inflation is sharply down and borrowing costs in Hungary and the Czech Republic are falling.
The first quarter showed some economic momentum.
In Hungary, the economy expanded by 0.8% quarter-on-quarter, its second biggest quarterly growth since climbing out of recession nearly a year ago. On a year-on-year basis, GDP rose 1.1%, above a poll forecast of 1.0% and the biggest gain since the third quarter of 2022.
The Czech economy also rose more than expected, posting a 0.5% quarterly increase, above expectations of 0.4% in a Reuters poll. On a year-on-year basis the rise was 0.4%, a touch above expectations.
The data, while not including the complete breakdown of activity, could provide some backing to policymakers in both countries where signals point to a possible slowdown to the pace of interest rate cuts in easing cycles started last year.
While inflation has come sharply down from double-digit rates seen last year, service sector price rises remain an area of concern for rate setters. Another reason is delays to cuts in U.S. interest rates that are supporting the dollar and, in turn, adding pressure to emerging market currencies like those in Central Europe.
(Reporting by Jason Hovet in Prague and Boldizsar Gyori in Budapest, Editing by Angus MacSwan)
