Polish industrial output grew just 3.5% y/y in May, data from statistical office GUS showed on June 17. The weak performance revived worries that surfaced after production came close to stalling the March that the economy is struggling to recover momentum from a disappointing first quarter.
The result was below consensus forecasts for expansion of 4.65%, with analysts apparently underestimating the degree to which activity was likely to slow from April's relatively robust 6% growth. In monthly terms, industrial production fell 3.6%.
While retail sales also weakened in May, it is the production figures that have analysts more concerned that Polish economic growth is faltering in the second quarter. The economy contracted 0.1% q/q in January-March; in annual terms growth sank to 3%.
The May reading was a slight surprise in the context of PMI data. The forward-looking index rose 1.1 points to 52.1 in May, Markit Economics reported on June 1. The improvement was taken as a sign of return of momentum for the Polish manufacturing sector after April's sharp fall of over 2 points.
Output in May was driven mainly by 5.5% y/y growth in the manufacturing segment, as well as a 3.6% expansion in the water and waste management sector. These readings offset considerable falls in other segments, including electricity, gas, steam and air conditioning supply, which dipped 9%, mining and quarrying (-15.4%), and construction (13.7%).
Some suggest the weak figures don't necessarily set up a disappointing result for GDP in the second quarter. “May’s activity data were pretty lacklustre. However, we could caution against interpreting these as suggesting that the economy continued to slow sharply in Q2,” Capital Economics writes.
However, BZ WBK is less sanguine. “Weaker data increase our concerns about GDP growth in the second quarter after two months," the bank's analysts state. "It seems as if GDP dynamics might not be significantly better than in the first quarter. We still hope a fairly good sentiment in Europe and the [government’s child subsidy] programme will contribute to growth in the coming quarters."