Stabilization of PMI index in November

Polish manufacturing PMI has not changed in November compared to October and amounted to 50.8 pts, running above the market expectations (50.2 pts) and our forecast (50.0). Thus, the index has for the fifth consecutive month stood above the 50 pts threshold dividing expansion from contraction of activity. The index stabilization resulted from higher contributions of the sub-indices for employment, suppliers’ delivery times and lower contributions of the sub-indices for output, new orders, and inventories.

Disturbances in supply chains have returned

Especially noteworthy in the data structure is a significant lengthening of suppliers’ delivery times that was recorded in November. It was the continuation of a phenomenon observed in October but in November its scale was bigger. According to the statement, longer delivery times are not the effect of higher demand amid limited capacity which would suggest an improvement of sentiment but result from the disturbances in supply chains caused by the second wave of the pandemic. Higher employment sub-index may also be misleading. According to the statement, faster pace of employing new staff resulted largely from attempts to replace employees in quarantine and is not a sign of improving situation. In our analyses we have repeatedly pointed out the high likelihood of staff shortages due to growing number of people in quarantine and unable to work remotely (see MACROpulse of 17/9/2020). This view is also consistent with the results of GUS business surveys which pointed to a growing percentage of employees in quarantine. Excluding the positive impact of the sub-indices for suppliers’ delivery times and employment, the Polish manufacturing PMI would be 0.8 pts lower and would stand at the 50 pts threshold dividing expansion from contraction of activity.

Lower orders amid disturbances in supply chains

Noteworthy in data structure is also a marked decrease in the sub-indices for new orders, including export orders, which in both cases stood at the lowest level since June 2020. The decrease in orders observed during the second wave of the pandemic is visibly less deep than during the first wave. This shows that although the number of infections and the imposed administrative restrictions have led to disturbances in supply chains, we have so far managed to avoid their being completely broken as during the first wave (borders were not closed during the second wave). Lower orders resulted in lower output which decreased in MoM terms for the first time since June 2020.

Polish manufacturers are still optimistic

The index of anticipated production in the horizon of 12 months has increased in November compared to October and stood visibly above the 50 pts threshold. It suggests that the companies are treating current difficulties as temporary. This is consistent with our forecast in which, after a temporary decrease in the annual dynamics of the Polish GDP in Q4, 2021 will see a recovery of economic growth. We will present our updated medium-term macroeconomic scenario in the next MACROmap.

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

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