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Did economic growth accelerate in Q4?

Calendar effects unfavourable for industrial production

In accordance with GUS data, dynamics of sold production of industry in enterprises employing more than 9 people dropped to 2.7% YoY in December vs. 9.1% in November, which was slightly below our forecast equal to the market consensus (2.9%). Seasonally-adjusted industrial production decreased by 1.8% MoM in December.

The main reason for the decrease in industrial production dynamics between November and December was an unfavourable difference in the number of working days. In December 2017 the number of working days was lower by 2 days than in 2016 while in November 2017, including an extra free day granted by employers due to the Independence Day falling on a Saturday, it was the same as the year before.

Like in previous months, we saw a relatively fast increase in output both in segments with a considerable share of exports in sales ("other transport equipment” (11.0% YoY in December) and "electrical equipment” (6.5%), and in segments connected with the construction sector "metals” (10.7%), ”other non-metallic mineral products” (6.9%), and "rubber and plastic products” (6.3%). Conducive to higher dynamics of total industrial production was also higher growth rate of production in mining.

Public investments support construction activity

According to GUS data, the construction-assembly production growth dropped to 12.7% YoY in December vs. 19.8% in November. Conducive to slower production growth rate were the above-mentioned unfavourable calendar effects. Seasonally-adjusted construction-assembly production rose by 3.1% MoM.

We believe that in December – like in November – the construction-assembly production was supported by the strong rebound in the investments of local governments dictated by the necessity to meet the budgets of financial expenditures before approaching end of the year. This is reflected by high production growth rate in the construction sector dealing with civil engineering (20.6% YoY in December). We believe that in the coming months the production will stay within an upward trend, boosted by growing absorption of EU funds, higher public outlays on infrastructure and continuing recovery in residential construction.

In the whole Q4 2017 the average dynamics of industrial production rose to 8.1% vs. 6.3% in Q3 while the dynamics of construction-assembly production dropped to 17.1% vs. 19.4%. Today's data pose a slight upside risk to our forecast of GDP growth in Q4 2017 (down to 4.8% YoY vs. 4.9% in Q3)

December retail sales under the influence of "Black Friday”?

In accordance with the GUS data released today, nominal dynamics of retail sales in enterprises employing more than 9 people decreased to 5.2% YoY in December vs. 8.8% in November, running below our forecast (9.0%) and the market consensus (8.7%). Real retail sales growth dropped to 5.2% YoY in December vs. 8.8% in November. Conducive to their decrease were mainly lower sales in the category "motor vehicles, motorcycles, parts” (-0.9% YoY in December vs. 14.1% in November). Deceleration in sales growth may have also occurred due to the abatement of the effect of earlier (i.e. done in November) Christmas shopping. This may have been supported by the increasing popularity of the so-called 'Black Monday' (24 November) Our view is supported by the structure of retail sales – lower dynamics were recorded i.a. in such categories as "textiles, clothing, footwear” and "furniture, audio-video and household equipment”.

In the whole Q4 2017 retail sales in constant prices rose by 7.0% vs. a 7.9% increase in Q3, which poses a slight upside risk to our forecast in which private consumption growth decreased to 4.3% in Q4 vs. 4.9% YoY in Q3.

The data released today are neutral for PLN and yields on Polish bonds, we believe.