Polish industry practically stalled in March as it recorded production growth of just 0.5% y/y, a considerable slow down on the 6.7% expansion the previous month, data from statistical office GUS showed on April 19.
The March result was well below consensus, with analysts expecting expansion of up to 4.8%. Less than stellar retail sales growth revealed the same day only deepened the disappointment with economic indicators in the first quarter. The feeble growth reinstates concern that Poland could face difficulties maintaining the pace of economic growth, which pushed to 3.9% in the final quarter of 2015.
The performance is even more of a surprise as it is out of line with recent purchasing manager index readings. Poland’s PMI performed better than expected as it swelled to 53.8 in March from 52.8 in February, the fastest growth in eight months, compiler Markit reported in early April.
In monthly terms, production grew 6.8%, the same rate as in February. However, in annual terms, the reading is the lowest since at least January 2015.
Output appears to have been affected by mainly by a collapse of production in the struggling mining and quarrying sector, which crashed 16.3% on the year – including a drop of 14% in mining of hard and lignite coal. Production in the electricity, gas, steam and air conditioning supply sector dipped 6.1%. Growth in the manufacturing sector managed to push to just 1.8%. Construction sank 15.8%.
While unwilling to accept an economic slowdown is on the cards, analysts are hard pushed to explain the fading macro data. "It is hard to identify the source of this slowdown, because both the situation in Poland's economy – the improvement on the labor market, decent income growth and improving consumer optimism – and abroad – improvement in the economic activity of our main trading partners, rising foreign orders – seem to support continuation of positive trends," writes BZWBK.
"Although it is hard to disregard the poor data for March ... we assume that growth in industrial output and retail sales should bounce up later this year, supported, among others, by revival of economic activity in Europe and an increase in consumer spending boosted by '500+' child benefit programme," they sum up.