Calendar effects were the main driver of higher production growth

According to GUS data, the volume of industrial production sold by businesses employing more than 9 persons climbed to 13.2% YoY in August from 9.8% in July, running below market expectations (13.7%) and our forecast (15.9%). The sharp rise in industrial output between July and August was chiefly attributable to the statistical effect related to the favorable difference in the number of business days (August 2021 had two business days more than August 2020, while July 2021 one less than July 2020). In August, seasonally-adjusted industrial production contracted by 0.3% MoM, marking the first decline since last April. We estimate that the level of industrial output in August was 7.3% higher than before the the pandemic (i.e. February 2020).

Supply barriers held back production in export industries

Sector-wise, particularly noteworthy is the slowdown in production growth in categories having a significant share of export sales in revenues. We estimate that in August, production growth in exporting sectors slowed down to 7.8% YoY from 7.9% in July, despite positive calendar effects. Export industries remain affected by supply constraints, a trend previously signaled by the August PMI for Polish manufacturing, which pointed to rapidly growing production backlogs (see MACROpuls of 01/09/2021). In this context, it is worth noting the continued decline in production in the "motor vehicles, trailers and semi-trailers" category (-12.9% YoY in August vs. -4.7% in July). This trend is caused by downtime in some factories following from a shortage of semiconductors (see MACROmap of 20/09/2021). On the other hand, other manufacturing sectors recorded an increase in their output growth rate. We estimate that production in construction-related industries expanded by 24.7% YoY in August, up from 18.6% in July, and in other sectors (excluding export and construction categories) rose by 13.9% YoY in August vs. a 9.1% increase in July.

Supply barriers will force new investments

We maintain our assessment that the recovery in industrial production will be held back by increasing supply barriers in the coming months. We believe that in H2 2021 supply constraints will be a factor conducive to an increase in gross fixed capital formation by enterprises in some manufacturing industries. This is consistent with our forecast assuming that total investments will grow by 7.6% YoY in Q3, up from 5.0% in Q2, to reach 13.5% in Q4 (see MACROmap of 09/06/2021).

Today's data on industrial production poses a downward risk to our forecast, whereby Poland's GDP will increase by 5.4% YoY in Q3, down from an 11.1% growth in Q2. The data is neutral for the PLN and Polish bond yields.

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