Positive data on industrial production

In accordance with the Polish Central Statistical Office's (GUS) data, the volume of sold production of industry in enterprises employing more than 9 people increased by 0.9% YoY in January vs. +11.2% in December, running above the market consensus (0.6%) and our forecast (0.0%). Statistical effects (base and calendar) were the main reason behind the deceleration of the industrial production growth rate between December and January. In December 2019, the seasonally adjusted production decreased by 2.9% MoM, while in January 2020 it grew by 2.9% MoM, which boosted the annual production growth in December 2020 and hampered it in January 2021. Furthermore, the deceleration in the production growth rate between December and January was also driven by a statistical effect: the difference in terms of working days was unfavourable (in December 2020 there was one day more comparing to 2019, while in January 2021 there were two days less comparing to 2020).

Seasonally-adjusted industrial production increased by 1.7% MoM between December and January. We assess that the industrial production level in January was 4.6% higher comparing to the period before the outbreak of the pandemic (i.e. February 2020).

External demand supports Polish industry

Strong statistical effects mentioned above make it difficult to assess trends in individual industry branches precisely. Despite a clear decline in annual production growth rates between December and January, the activity accelerated most in the categories with a significant share of export sales in the revenues. We assess that industrial production rose in January by 4.9% YoY (vs. +18.0% in December) in those categories where the share of exports in sales was over 50%. A foreign demand boost has already been signalled before by the Polish PMI in January with the number of export orders growing most quickly since January 2018. We estimate the production growth rate in construction-related sectors to have stood at 0.0% YoY in January (+14.1% in December), while in other branches (excluding for exports- and construction-related categories), production decreased by 1.3% YoY comparing to a 6.8% increase in December.

An important risk factor for the development of industrial production in the coming months is the possibility of bottlenecks in global supply chains and shortages of components. In this context, the issue of the existing shortage of chips (semiconductors) used in the automotive industry is particularly important. It contributes to the reduction or even suspension of production of cars by some automotive groups, which leads to a reduction in demand for intermediate goods (also produced in Poland) used in the production process. The decline in production growth rate in the category "motor vehicles, trailers and semi-trailers" to -3.5% YoY in January vs. 9.0% in December may reflect these trends.

Slight upside risks for Q1 GDP, although uncertainty still high

Industrial production data released today indicates that industrial activity in January was characterised by a high degree of resilience to the restrictions introduced in December and extended in January due to the escalating COVID-19 pandemic. The data indicates a slight upward risk to our Q1 2021 GDP forecast (-1.0% YoY vs. -2.8% in Q4 2020). A more precise assessment of this risk will be possible after analysing tomorrow's retail sales and construction & assembly production data. Our forecast is, however, still subject to uncertainty regarding further course of the epidemic, the pace of vaccine distribution and the risk of another wave of infections in Q1 2021.

Today's better-than-expected industrial production data for January is slightly positive for the PLN and Polish bond yields.

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