No worries about construction

Recovery in industry returned

In accordance with GUS data, sold production of industry in enterprises employing more than 9 people rose by 9.1% YoY in May vs. a 0.6% decrease in April, which was above our forecast (8.9%) and the market consensus (8.6%). The main reason for the sharp increase in production dynamics between April and May was a favourable difference in the number of working days (in May 2017 the number of working days was higher by one day than in 2016, while in April 2017 it was lower by two days than the year before). Seasonally-adjusted industrial production increased by 1.2% MoM in May vs. a 1.2% decrease in April, which indicates a recovery in industrial activity.

High, against the backdrop of other categories, production growth was recorded in May in the segments: "basic metals” (16.8% YoY), "other non-metallic products” (14.1% YoY), "metal products” (13.4% YoY), "rubber and plastic products” (16.6% YoY), thus indicating a positive impact of the recovery in construction on branches manufacturing goods used in the assembly-construction production. In addition, like in the period between January and April, high production growth was recorded in May in branches with a significant share of exports in the sales of products, trade goods and materials: "electrical equipment” (13.1% YoY) and "motor vehicles, trailers and semi-trailers” (11.8%). This data is in line with our scenario, in which the recovery in the global trade will boost demand for Polish exports to the Eurozone and support activity in manufacturing.

No worries about construction

According to GUS data, the construction-assembly production rose by 8.4% YoY in May vs. a 4.3% YoY increase in April. Seasonally-adjusted construction production dropped by 3.2% MoM. The increase in the construction dynamics occurred due to the above-mentioned difference in the number of working days and abatement of weather anomalies observed in April (see MACROpulse of 20/5/2017). The factor limiting acceleration of production dynamics in May was lower growth rate (3.3% YoY vs. 14.0% in April) in the category "specialized construction activities”. On the other hand, the two remaining construction divisions recorded high production growth rate – "civil engineering” (25.8% YoY) and "construction of buildings” (10.7%). Considering the work characteristics within the first out of three categories (i.a. land preparation for the construction site and finishing works), which is mainly dependent on activity in the other two sectors, the lower growth rate in this division was temporary, we believe. We expect that in subsequent months the assembly-construction production will show an upward trend due to the forecasted by us growing absorption of EU funds, significant increase in public outlays on infrastructure and recovery in residential construction.

Retail sales in line with short-term trend

In accordance with the GUS data released today, retail sales in enterprises employing more than 9 people rose in current prices by 8.4% YoY in May vs. 8.1% in April, which was above our forecast (8.1%) and below the market consensus (9.0%). The sales in constant prices rose by 7.4% YoY in May vs. 6.7% in April. Conducive to higher annual sales growth in May was the abatement of weather anomalies observed in April 2017, which caused slowdown in sales dynamics in the categories: "textiles, clothing, footwear” and "motor vehicles, motorcycles and parts” in April. The calendar effects related to later Easter than last year had an opposite impact. The lower sales dynamics in the categories "food beverages and tobacco products” and "non-specialized retail stores” (mostly supermarkets) were recorded in May. The data on sales in May is consistent with our scenario of decrease in private consumption growth rate to 4.2% YoY in Q2 vs. 4.7% YoY in Q1 2017.

The data on industrial and assembly-construction production in the period April-May supports our forecast of GDP growth in Q2 2017 (down to 3.9% YoY vs. 4.0% in Q1). In our view the aggregate impact of today's data is neutral for PLN and yields on Polish bonds.