Statistical effects cause strong decrease of industrial production growth
In accordance with the GUS data, the volume of industrial production sold in enterprises employing more than 9 people increased by 29.8% YoY in May compared to 44.5% in April, running above market expectations (29.0%) and our forecast (27.0%). The main reason for the strong contraction in industrial production growth between April and May was a weaker effect of last year's low base. In addition, a statistical effect in the form of an unfavourable difference in the number of working days (in May, the number of working days was one less than in 2020, while in April it was the same as in the previous year) had a downward impact on industrial production growth between April and May. Seasonally-adjusted industrial production increased by 0.8% between April and May. We assess that the industrial production level in May was already 7.1% higher than in the period before the outbreak of the pandemic (i.e. February 2020).
Export branches were the main source of industrial production growth
Strong statistical effects mentioned above make it difficult to assess trends in individual industry branches precisely. The highest rates of output growth were recorded in categories with a significant share of export sales in the revenues. We estimate that production in export-oriented branches rose in May by 54.1% YoY comparing to a 117.1% growth in April. Thus, export branches remain the main source of industrial production growth in Poland. Growing production in export industries is supported by the currently observed strong recovery in world trade. A factor supporting production in export industries is also Poland's upward shift in international supply chains (see MACROmap of 14/6/2021). Increases in industrial production were also recorded in other processing categories. We estimate that production growth in construction-related sectors stood at 34.4% YoY in May vs. 39.9% in April, while in other branches (except for exports- and construction-related categories), production increased by 16.3% YoY in May comparing to 17.3% in April.
Supply-side barriers will constrain industrial activity
We believe that in the coming months, the recovery in industrial production will be limited by increasing supply barriers. This assessment is supported by the structure of the May PMI for the Polish manufacturing sector, according to which, due to material shortages and bottlenecks in global supply chains, delivery times in Polish manufacturing are currently at a record high (see MACROpulse of 1/6/2021). This means that some companies are facing the need to reduce or halt production due to material shortages.
Today's industrial production data represents a slight upward risk to our forecast, according to which Poland's GDP will grow by 11.2% YoY in Q2 vs. a 0.9% decline in Q1. At the same time, the data is neutral for the PLN and yields on Polish bonds.