Holiday on the 12th of November has not limited production growth
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 4.7% YoY in November vs. 7.4% in October, running above our forecast (4.5%) and the market consensus (3.6%). Seasonally-adjusted industrial production increased by 0.1% MoM in November.
The main factor behind the decrease in industrial production dynamics between October and November was an unfavourable difference in the number of working days (in November 2018 the number of working days was the same as in 2017, while in October 2018 it was one day higher than the year before). In our view, the negative impact of calendar effects on the November production was limited due to the particular mode in which the additional holiday on 12 November was announced. We believe that due to the fact that the holiday was announced late, most companies had already accepted orders and set production plans for November. In effect, most of them were probably trying to make up for the "lost” working day during the month.
Exporters are not giving in
The structure of the November production points to a high production growth rate in the export-oriented branches "other transport equipmen” (28.6% YoY) and "electrical equipment” (16.5%). The robust production growth in the export-oriented branches in November is good news in the context of the deceleration observed from the beginning of the year in manufacturing in the Eurozone, due to the slowdown in global trade and downturn in the automotive industry (see MACROmap of 17/12/2018).
In our view, the ongoing fast production growth in the export-oriented branches results from the fact that Polish companies are clearing the production backlogs accumulated in recent quarters. Given a four-month-long decrease in new foreign orders, signaled by the November business survey results (PMI), this buffer will gradually dry out, which points to a high likelihood of slower production growth in export-oriented branches in the coming months (see MACROpulse of 3/12/2018).
Further recovery in construction
According to GUS data, the construction-assembly production dynamics decreased to 17.1% YoY in November vs. 22.4% YoY in October. Its decrease resulted from last year's high base effect (in November 2017, the construction-assembly production rose by 3.5% MoM) and from the above-mentioned unfavourable calendar effects. Seasonally-adjusted construction-assembly production increased in monthly terms by 0.4%.
The structure of data on the November construction-assembly production continues to signal fast growth of public outlays on infrastructure and high activity in residential construction. It may be noted that the sustained recovery in construction had a positive impact on related branches of industrial production: "other non-metallic mineral products” (up by 7.6% YoY in November) and "rubber and plastic products” (7.3%).
GDP growth to slow down in Q4
The November data on industrial production and construction-assembly production do not alter our forecast of economic growth in Q4 (4.5% YoY vs. 5.1% in Q3). Our scenario is consistent with the strong downturn observed in countries being Poland's major trade partners in December (see MACROmap of 17/12/2018). Today's data are slightly positive for PLN and Polish bond yields.