Supply barriers pressure on the recovery in the manufacturing sector is growing

PMI for March below expectations

PMI for Polish manufacturing increased from 53.4 pts in February to 54.3 pts in March, running below our forecast (55.5 pts) and market consensus (55.4 pts). Nonetheless, it stood at the highest level since January 2018. The PMI increased due to higher contributions of 4 components (new orders, current output, suppliers’ delivery times and employment), while the contribution of stocks of purchases did not change. March was the third consecutive month to see an increasing growth in the total number of orders (including exports), the acceleration being largely driven by the recovery in the global trade accompanied by the quickly increasing activity in the industrial production sector in the Eurozone (see MACROmap of 29/03/2021). An increase in the number of orders led to an accelerated growth in the current output (highest since July 2020).

Supply barriers pressure on the recovery in the manufacturing sector is growing

The PMI structure in March is indicative of a growing supply barrier, which will constrain production growth in the manufacturing sector in the months to come. In March, the delivery times component stood at the lowest level in the survey history. This means that lengthened delivery times caused by shortage of materials and bottlenecks in global supply chains curbed the recovery in the Polish manufacturing sector to a greater extent than in April 2020, when hard lockdown was in force and global supply chains were broken. Lengthened delivery times and unsatisfied demand result in growing backlogs of work (highest since January 2007) and a quicker growth in prices of the production sold (the component reaching the highest level in the survey history).

PMI structure supports the revised GDP path

The PMI structure reflects the GUS business survey results, which are indicative of strong supply barriers curbing the industrial production growth in many sectors across Poland (see MACROpulse of 18/03/2021). It also supports the quarterly GDP growth path that we have revised, in which the growing external demand will stimulate production in branches with a high share of exports in sales volumes in Q2 2021 along with the increasing availability of materials and global supply chains becoming less tight (see MACROmap of 29/03/2021). Our scenario is further supported by the PMI for production expected in a 12-month horizon, which keeps on running on a high level, even though it fell slightly in March comparing to February.

Today’s results of the PMI survey for the Polish manufacturing sector are neutral for the PLN and the yields of bonds.