Labour shortages limited production growth
Business sentiment indicator for Polish manufacturing (PMI) rose to 52.5 pts in August vs. 52.3 pts in July, running below our forecast equal to the market consensus (53.0 pts).
Flash PMIs for the Eurozone (including Germany) pointed to an improvement of sentiment in manufacturing (see MACROmap of 28/8/2017). Surprising in this context is the structure of the August Poland PMI which shows a slowdown of new export orders growth. At the same time, we saw faster growth of domestic orders reflected by an increase in the sub-index for new orders. We believe that stronger domestic demand is related to the positive impact of the rebound in construction (resulting from acceleration in public investments implemented with the use of EU funds) on the manufacturing branches supplying goods used for the assembly-construction production.
Despite faster growth of new orders, the output sub-index rose in August by only 0.1 pts to 52.1 pts. This increase was also significantly lower from the anticipated impact of the resumption of operations in the automotive factories after the July holiday break (see MACROpulse of 1/8/2017). At the same time, the surveyed companies have for the first time since February 2015 pointed to an increase in production backlogs. The companies have attributed the delays in the execution of orders to shortages of labour and supply constraints. Slower increase in the number of employees was also signaled by a lower employment sub-index (down to 50.9 pts vs. 51.6 pts in July). In our view, the employment growth was limited – like in the recent months – by growing difficulties of companies in finding skilled labour. This view is confirmed by GUS business surveys in which the percentage of manufacturing companies reporting such difficulties was the highest in the survey history.
The average PMI in the July-August period (52.4 pts) stood at a lower level than in Q2 (53.3 pts). Thus, today's data signal a slight downside risk to our forecast of the economic growth rate in Q3 (4.1% YoY vs. 3.9% in Q2). We will present our revised scenario for 2017-2018 on 11 September.
Today's data are slightly negative for PLN and yields on Polish bonds.