Statistical effects 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 -1.3% YoY in August vs. 5.8% in July, running significantly below our forecast (0.1%) and the market expectations (1.7%). The sharp decrease in the annual dynamics of industrial production in August compared to July resulted from the statistical effect in the form of an unfavourable difference in the number of working days (in July the number of working days was 1 day higher from 2018 while in August 2019 it was lower by 1 day than the year before). An important factor conducive to lower dynamics of industrial production in August compared to July was also the unfavorable statistical effect relating to a different from the last year holiday schedule in car factories.
The roof over the Polish industry leaks more and more
Seasonally-adjusted industrial production decreased by 1.2% MoM in August. Thus, its 3-month moving average has reached the lowest level since March 2012. Further decrease in the seasonally-adjusted industrial production shows that the downturn in Poland’s major trade partners (in particular the recession in German manufacturing) and the slowdown in domestic construction have an increasingly strong negative impact on activity in Polish manufacturing. This view is supported by the structure of the August data, in which a sharp decrease in production dynamics was recorded in branches with a large share of export sales in revenues and in branches connected with construction. This is consistent with our view from the month before that the slowdown of activity in industry is sustainable (see MACROpulse of 21/8/2019).
GDP growth will slow down in the coming quarters
Today's data on industrial production pose a downside risk to our forecast of GDP growth in Q3 (4.3% YoY vs. 4.5% in Q2) and in the whole 2019 (4.4% vs. 5.1% in 2018). At the same time, today’s data, being significantly lower from the market expectations, are negative for PLN and yields on Polish bonds.