Polish industry back on form in April to soothe mounting concern

Polish industry back on form in April to soothe mounting concern
By bne IntelliNews May 19, 2016

Polish industry grew 6% y/y in April, soothing - for the month at least - worries about the state of the sector that surfaced after production came close to stalling the previous month, data from statistical office GUS showed on May 19. 

The April result was well above consensus, with analysts expecting expansion of just 3.5% following an expansion of just 0.5% in March. In monthly terms, production fell 3.1%.

The improved annual reading came in line with retail sales. In fact, the two indicators have closely shadowed one another - as well as regional peers - through an erratic first four months of the year. Still, analysts now claim they are more confident Polish GDP growth will perk up in the second quarter. The economy contracted 0.1% in quarterly terms in January-March. 

That is despite the fact that April's industrial activity was also at odds with the most recent PMI reading, which showed a decline of  2.8 points to 51.0. The drop was the second largest since November 2008, and pointed to “a marked loss of growth momentum at the start of the second quarter", compiler Markit suggested at the time.

Output in April was driven mainly by 8.3% y/y growth in the manufacturing segment, as well as a 4.6% expansion in the water and waste management sector. These readings offset considerable falls in other segments. Output in the electricity, gas, steam and air conditioning supply sector dipped 10.1%, while the mining and quarrying sector fell 11.7%. Construction sank 14.8%.

“The breakdown of the data showed that the pick-up in the year-on-year industrial production growth rate was driven by Poland’s key manufacturing sector. It looks like economic growth rebounded at the start of the second quarter … to around 3.5% y/y in April, up from 3.0% y/y in the first quarter,” Capital Economics writes.

“It is hardly likely that the Polish industry will go through a lasting slowdown, as the sector is receiving a substantial part of its orders from the EU," adds BZ WBK. "We expect industry and export to remain important growth drivers in the coming quarters, alongside private consumption.”

The improved April data is also likely to further weaken speculation about a cut in Polish interest rates, the analysts add.