Slovak industrial production continued its recovery at the start of 2017, as output grew 7.6% y/y in January, the statistics office reported on March 13.
The reading suggests a welcome acceleration as the year kicked off, following an erratic second half to 2016. A 3% gain in December represented something of a stabilisation following a deep drop in the summer, as holidays at German factories saw production sag in Slovakia.
However, growth in the final quarter of 2016 remained subdued, capping output at 3.3% for the full year. The data illustrated just how difficult a year it was for Slovak industry, with export demand out of the Eurozone – the dominant driver of the economy – patchy, and a deep lull in investment crippling domestic demand. The industrial sector expanded 6.9% in 2015.
Indicators across the Visegrad region hint at a much stronger start to 2017, and the Slovak industrial data is just the latest example. A rise in activity and confidence in the Eurozone – the source of an overwhelming bulk of export demand for the region – is driving the gains. Activity grew 0.7% in monthly terms.
The annual growth was driven by a 6.3% rise in activity in the vital manufacturing sector; by far the biggest contributor to the Slovak economy. However, other sectors did even better. Utilities added 14.2% and activity in mining and quarrying pushed 19.1%.
The sluggish performance of Slovak industry last year served to illustrate the country’s huge reliance on the automotive sector, as erratic performance in auto exports saw overall output swing. Slovakia is the world’s largest per capita car producer. The automotive segment recorded a rise of 3.2% in January.
Meanwhile, signs of a turnaround in the falling investment trend in the country continue to arrive. Driven by a sharp drop in EU fund absorption, investment as a percentage of GDP fell 2.9pp to 20.6% in 2016, with the construction sector – heavily dependent on the public projects that rely on EU money – bearing the brunt. While the country’s builders still saw a 17.2% drop in activity in January, seasonally adjusted monthly figures reported 3.3% growth.