Further recovery in investments in Q1

Industrial production above expectations

In accordance with GUS data, dynamics of sold production of industry in enterprises employing more than 9 people rose to 8.6% YoY in January vs. 2.7% in December 2017, running above our forecast (7.8%) and the market consensus (8.0%). Seasonally-adjusted industrial production decreased by 0.8% MoM in January.

Calendar effects favourable for industrial production

The main factor behind the increase in industrial production dynamics between December and January was a favourable difference in the number of working days. In January 2018 the number of working days was the same as in 2017 while in December 2017 it was lower by 2 days than in 2016. Like in previous months, we saw a relatively fast increase in output both in segments with a considerable share of exports in sales ("machinery and equipment” (16.9% YoY in January), "electrical equipment” (12.6%), and furniture (12.2%) and in segments connected with the construction sector ”other non-metallic mineral products” (22.9%), "metals” (18.0%), and "rubber and plastic products” (14.4%). High output dynamics of export-oriented segments is supported by continuing good business climate for manufacturing in the Eurozone, in Germany in particular (see MACROmap of 29/1/2018), as it is conducive to higher demand for goods manufactured in Poland and used in the production of final products (so-called intermediate goods). On the other hand, higher industrial production growth in segments connected with the construction sector is supported by the recovery in domestic construction (see below).

Wide ranging recovery in construction

According to GUS data, the construction-assembly production growth rose to 34.7% YoY in January vs. 12.7% in December 2017. Conducive to faster production growth rate were the above-mentioned favourable calendar effects. Seasonally-adjusted construction-assembly production rose by 8.8% MoM, which has been its highest growth since March 2017. The growth of construction production in January was wide ranging and was recorded in all its sectors "construction of buildings” (38.0% YoY), "specialized construction activities” (36.9%), and "construction of civil engineering facilities” (27.6%). This shows that the construction-assembly production growth was boosted by higher public outlays on infrastructure, growing investment activity of enterprises and by continuing recovery in residential construction. Another important factor conducive to higher annual dynamics of construction-assembly production in January were favourable against historical background weather conditions, enabling to perform construction works.

Car sales boosted retail sales growth

In accordance with the GUS data released today, nominal dynamics of retail sales in enterprises employing more than 9 people increased to 8.2% YoY in January vs. 6.0% in December, running above our forecast (6.9%) and the market consensus (7.3%). Real retail sales growth rate rose to 7.7% YoY in January vs. 5.2% in December. Conducive to higher dynamics of retail sales were mainly higher sales in the category "motor vehicles, motorcycles, parts” (17.9% YoY in January vs. 0.1% in December) and "other” (12.2% vs. -1.3%). They increased the annual nominal retail sales growth by ca. 1.9 pp and 1.3 pp, respectively. Especially noteworthy in the data structure is high sales growth in the category "other retails sales in non-specialized stores” (8.5% YoY in January vs. 6.2% in December), pointing to a continuing strong consumer demand.

The January data on industrial production, construction-assembly production, and retail sales pose an upside risk to our forecast of GDP growth rate in Q1 (4.7% YoY vs. 5.1% in Q4 2017). In our view, the data are slightly positive for PLN and yields on Polish bonds.