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Surprisingly strong growth of industrial production

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 1.1% YoY in January vs. 3.8% in December 2019, running significantly above our forecast (-1.6%) and the market consensus (-0.1%). The main factor behind the decrease in the industrial production dynamics between December and January was an unfavourable difference in the number of working days (in December 2019 the number of working days was 1 day higher from 2018 while in January 2019 it was 1 day lower than the year before). However, the scale of the production slowdown in January was smaller than it would result from the unfavourable calendar effects. Thus, seasonally adjusted industrial production increased by 2.7% MoM in January. The increase in production may have resulted from the distribution of holidays in December 2019 which encouraged longer leaves of absence, limiting production at the time and boosting its dynamics in January.

Surprising production structure

The January data are substantially impacted by the aforementioned calendar effects, which makes it difficult to draw conclusions on their basis. The scale of the slowdown in manufacturing was limited by segments responsible for the supply of raw materials and consumables used in construction projects, i.e. “manufacture of coke and refined petroleum products”, “manufacture of other non-metallic products”, and “manufacture of rubber and plastic products”. In the light of the ending cycle in public investments, such production structure is quite astonishing. Such result may be linked to a relativel warm winter this year. We believe that the slowdown in domestic construction is sustained and in subsequent months will continue to negatively impact industrial production growth.

Thee export-oriented branches also recorded relatively high dynamics, which is a surprise in the context of the slowdown of economic growth observed in Poland’s major trade partners (Germany and the Eurozone), contributing to a marked decrease in demand for Polish exports. An accurate assessment of the prospects for the Eurozone manufacturing, and thus for the Polish export branches, will be possible after seeing tomorrow’s results of business surveys (PMIs). We will present the results of our analysis in the next MACROmap.

Slowdown of GDP growth in Q1

The January better-than-expected data on industrial production do not alter our forecast of economic growth in Q1 (3.0% YoY vs. 3.1% in Q4 2019). The main downside risk to our scenario remains the impact of the coronavirus epidemic in China on the economic activity in Poland and worldwide.

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