Production fuelled by export-construction mix

Slowdown of production growth clearly lower than expected

In accordance with the Polish Central Statistical Office's (GUS) data, the dynamics of sold production of industry in enterprises employing more than 9 people dropped to 5.6% YoY in March vs. 6.9% in February, running significantly above our forecast (4.3%) and the market consensus (4.2%). The seasonally-adjusted industrial production increased by 0.5% MoM in March.

The significantly slower than we expected deceleration of industrial production growth in March is especially surprising in the context of unfavorable statistical effects limiting this growth, as unfavourable difference in the number of working days (in February the number of working days was the same as in 2018, while in March 2019 it was lower by 1 day from the year before) was conducive to a decrease in the annual dynamics of industrial production between February and March. Furthermore, conducive to lower dynamics of industrial production was the last year's high base effect in the segments "foodstuffs” and "beverages” due to the fact that Easter was earlier in 2018 than in 2019.

Polish manufacturing still invulnerable

The structure of industrial production growth indicates that Polish industry is highly resistant to the slowdown of economic growth in Poland's main trade partners. According to the results of business surveys (PMI), output, export orders and total orders in the German manufacturing were decreasing at a fast rate in March. The April data released today point to the continuation of these unfavourable tendencies (these data will be discussed at greater length in the next MACROmap). Therefore, especially noteworthy are the high production dynamics recorded in March in the export-oriented branches of Polish manufacturing: "other transport equipment” (37.4% YoY), "electrical equipment” (15.4%), "computers, electronic and optical products” (9.6%), and "rubber and plastic products” (9.6%). We maintain the view that the good situation in the export-oriented branches may point to structural changes in Polish manufacturing, which, coupled with the fast decreasing production backlogs, enable to maintain a fast growth in sales despite a slower inflow of new orders (see MACROpulse of 17/4/2019 and MACROmap of 1/4/2019). In addition, the industrial production in March was supported by high activity of branches producing goods used in construction projects. This was reflected by a fast production increase in the segments "other non-metallic mineral products” (14.1% YoY) and "metal products” (9.0%).

GDP growth in Q1 above 4

Today's data on the March industrial production support our forecast of economic growth in Q1 (4.3% YoY vs. 4.9% in Q4 2018). They are also slightly positive for PLN and Polish bond yields.