November data above expectations

Industrial production above expectations

In accordance with GUS data, sold production of industry in enterprises employing more than 9 people rose by 3.3% YoY in November vs. a 1.3% decline in October, which was significantly above our forecast (0.0%) and the market consensus (1.8%). Seasonally-adjusted industrial production rose by 2.1% MoM in November.

The main reason for the increase in production growth in November was a positive statistical effect related to a favourable difference in the number of working days (in October 2016 the number of working days was lower by 1 than in 2015, while in November 2016 it was the same as the year before). The increase in industrial production growth was also due to higher output growth rate in segments related to construction (e.g. in the segment "manufacture of other non-metallic mineral products” - i.a. manufacture of cement: 10.5% YoY in November vs. 1.4% in October) together with increasing activity in this sector of the economy (see below). On the other hand, the high base effect from the year before, related to accelerated implementation of projects co-financed with EU funds from the 2007-2013 programming period and resulting from the need to settle them before the end of 2015 (see MACROpulse of 17/12/2016), had an opposite impact.

Assembly and construction production is growing

According to GUS, the construction and assembly production dropped by 12.8% YoY in November vs. a 20.1% decline in October. Seasonally-adjusted construction and assembly production rose by 6.7% compared to October. Higher construction and assembly production growth was largely due to a positive statistical effect related to a favourable difference in the number of working days (see above). The high base effects from the year before related to acceleration of works in the category "civil engineering”, resulting from the necessity of settling EU funds from the 2007-2013 programming period towards the end of 2015, had an opposite impact.

Today's data support our scenario in which the construction and assembly production dynamics reached the bottom in August (see MACROmap of 10/10/2016). This view is also supported by today's reading of the number of building permits, which rose by 15.1% YoY in November vs. a 1.4% increase in October. We expect that, together with the continuing recovery in residential construction and increasing absorption of EU funds within the new programming period, the assembly production dynamics will gradually increase in the coming months but will probably stay negative until the turn of Q1 and Q2 2017.

Increase in retail sales growth due to higher sales of cars

In accordance with the GUS data released today, retail sales in enterprises employing more than 9 people rose in current prices by 6.6% YoY in November vs. a 3.7% increase in October, which was significantly above our forecast (4.5%) and the market consensus (4.8%). The sales in constant prices rose by 7.4% YoY in November vs. a 4.6% increase in October. The acceleration in real retail sales growth was mainly due to higher dynamics of sales in the category "motor vehicles, motorcycles, parts” (7.3% YoY in November vs. -2.5% in October), "solid, liquid and gas fuels” (7.5% YoY vs. 0.9%) and other (-0.6% YoY vs. -8.6%). Data on retail sales suggest that their decline recorded in October in category "motor vehicles, motorcycles, parts” was temporary.

The aggregate impact of today's data is slightly positive for PLN and yields on Polish bonds

The November data on industrial production, retail sales, and construction and assembly production pose an upside risk to our scenario, in which the slowdown of economic growth, recorded in Q3 in Poland, will be continued and the annual GDP dynamics will drop to 1.7% in Q4 vs. 2.5% in Q3. The aggregate impact of today's data is slightly positive for PLN and yields on Polish bonds, we believe.