Slight improvement in Polish manufacturing

Polish manufacturing PMI rose to 50.8 pts in September vs. 50.6 pts in August, running significantly below the market expectations (52.6 pts) equal to our forecast. Thus, the index has for the third consecutive month stood above the 50 pts threshold dividing expansion from contraction of activity. The index slight increase resulted from higher contributions of 3 of its 5 sub-indices (for employment, new orders, and inventories), while lower value of the sub-index for output and suppliers’ delivery times had an opposite impact. It is worth noting that lower contribution of the sub-index for suppliers’ delivery times means shorter delivery times which, in the current conditions, is likely to indicate further reconstruction of delivery chains broken by the pandemic.

First increase in employment since June 2019

Especially noteworthy in the September PMI structure is the first since June 2019 increase in employment, whose pace was the fastest in 20 months. This signals that the uncertainty about demand outlook due to COVID-19 does not constitute a significant barrier to employment growth in manufacturing. This view is supported by the indicator of anticipated production in the horizon of 12 months which recorded a sharp increase in September hitting the highest level since May 2019. This means that, in spite of the flattening of industrial production in August (see MACROpulse of 18/9/2020) and the signaled by today’s PMI data slight increase in the manufacturing output in September, the companies anticipate a further and significant increase of activity in the long term.

Revival of global trade as the main source of recovery in Polish manufacturing

The optimism declared by the surveyed companies about future production is in line with the expected by us profile of recovery whose shape will remind Nike logo (see MACROmap of 6/7/2020). The main source of the recovery of activity in manufacturing in the coming months will continue to be the gradual revival of global trade and the resulting increase in Polish exports. The released last week manufacturing PMIs for the Eurozone and Germany are in line with the scenario presented above (see MACROmap of 28/9/2020).

Today’s PMI reading is slightly negative for PLN and yields on Polish bonds.

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