Business sentiment indicator for Polish manufacturing (PMI) decreased to 54.6 pts in January vs 55.0 pts in December running below our forecast that was in line with market expectations (55.4 pts). The decline in PMI index in January resulted from lower contributions of 2 out of its 5 components (for output and suppliers' delivery times). An opposite impact came from higher contributions of subindices for employment, new orders and stocks of purchases.

Especially noteworthy in the data structure is an increase in new orders subindex (56.7 pts in January vs. 56.0 pts in December) to its highest level since January 2015. The increase was accompanied by a rise in new export orders index that came despite marked PLN appreciation last month. Growth of export orders is supported by strong business sentiment in German manufacturing, which is conducive to higher demand for goods manufactured in Poland and used in the production of final products (see MACROmap 01.29.2018).

Strong growth in orders was conducive to a rise in employment subindex that increased to 53.1 pts in January vs. 52.0 in December, which is its highest level since April 2017. In our view, in the coming months the increase in employment will be more and more limited by growing difficulties of companies in finding skilled labour. It would be a factor conducive to higher investments in order to implement less labour-intensive production methods, and therefore increase labour productivity.

Despite of slight fall of PMI index in January its value was above the average of Q4 2017, signaling upside risk to our forecast of GDP growth in Q1 2018 (4.2% YoY vs. 5.1% YoY in Q4 2017). We will present our latest macroeconomic scenario in the next MACROmap.

Today's data is neutral for PLN and yields on Polish bonds.

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