Solid November production, but outlook still uncertain

Industrial production growth rate markedly above expectations

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 decreased to 1.4% YoY in November vs. 3.5% in October, running significantly above our forecast (0.8%) and the market expectations (0.0%). It is worth emphasizing that the decrease in the annual dynamics of industrial production in November compared to October resulted from the statistical effect in the form of an unfavourable difference in the number of working days (in November 2019 the number of working days was 1 day lower from 2018 while in October 2019 it was the same as the year before). Seasonally adjusted industrial production increased by 5.4% YoY vs. 3.8% in October, hitting the highest level since April 2019.

Marked slowdown of production in the automotive branch

The structure of industrial production in November is characteristic for months with unfavourable calendar effects, namely a decrease in the annual growth rate was recorded in almost all branches. Two categories had a particularly significant impact on the overall production growth rate – “manufacture of motor vehicles, trailers and semi-trailers” and “electricity, gas, steam and hot water production and supply”.

The automotive branch recorded a marked decrease in production (down by 4.5% YoY in November vs. a 0.9% increase in October, decreasing the overall industrial production dynamics by ca. 0.6 pp). This may have been related to the ongoing downturn in German automotive industry. Although this hypothesis is difficult to conclusively verify due to improved sentiment recorded in German manufacturing in November (according to PMI).

On the other hand, the scale of the deceleration in overall industrial production was limited by higher production in the aforementioned category dealing in utilities (14.4% YoY in November vs. 6.4% YoY in October), which boosted the overall production dynamics by ca. 0.6 pp. A marked production increase (i.a. in companies of the heating branch) is hard to explain, considering that it has been one of the historically warmest Novembers.

Solid November production, but outlook still uncertain

The data on the November industrial production look quite good, but it should be pointed out that the situation in the Eurozone continues to pose the biggest risk to the outlook for Polish manufacturing in the coming months. After two months of improvement (October, November), PMI results indicated deterioration of sentiment again in December. Particularly alarming in the survey is a deepening decrease in employment in German manufacturing. Thus, we maintain our forecast assuming further slowdown of economic growth (3.5% YoY in Q4 and 4.2% YoY in the whole 2019).

Today’s data on industrial production are slightly positive for PLN and bond yields.