Polish PMI improves in March

Polish PMI improves in March
By bne IntelliNews April 1, 2019

Poland’s PMI rose 1.1 points to 48.7 in March, remaining below the 50-point line separating contraction from growth, IHS Markit reported on April 1. 

The indicator improved, bucking a downward trend evident in seven of the previous nine months while also lingering below the 50-point threshold for the fifth month straight.

“Output, new orders and employment all continued to decline, with new export work dropping at the strongest rate since June 2009. That said, the overall downturn showed signs of easing as production and new business both registered slower rates of reduction than in February,” IHS Markit said.

Inventories of finished goods built up at the strongest rate in 20 years in March, the index’s compiler also noted. Backlogs of work continued to fall in the eighth month running. That said, suppliers' delivery times lengthened further owing to shortages of raw material.

Meanwhile, input cost inflation was unchanged from February's 19-month low, while output prices rose at the fastest pace in three months, the index’s compiler said.

“It is unclear whether the Polish manufacturing sector turned a corner in March," IHS Markit’s Trevor Balchin said in a comment, pointing to slower declines in output and new orders and the 12-month outlook for production the strongest since September.

On the other hand, new export business, employment and purchasing all fell at faster rates while inventories kept accumulating in March.

"With the German manufacturing sector experiencing a stronger downturn in March, it is likely that Poland will continue to be impacted by the weakness of its western neighbour in the short term,” Balchin said.

The apparent weakness of the Polish industrial sector is yet to be confirmed by industrial production data for March, due later this month. But Poland's manufacturers appear resilient to the slowdown.

February industrial production figures surprised to the upside, accelerating growth to 6.9% y/y despite PMI improving only very insignificantly that month. 

While there can be mismatches between individual readings of the PMI and the actual industrial production figures, the current consensus for the Polish economy forecasts an incremental deceleration of economic growth in Poland to still robust 4% y/y in the coming quarters.

Earlier predictions of a slowdown to around 3.5% this year have been corrected following the announcement of the government’s fiscal stimulus plan in late February.

Polish economic growth came in at 5.1% in 2018, the fastest since 2007. GDP slowed down slightly to 4.6% y/y (4.9% unadjusted) in the fourth quarter.