Strong overheating in Polish manufacturing

The PMI index for the Polish manufacturing sector rose to 59.4 pts in June vs. 57.2 pts in May, clearly above market consensus (57.0 pts) and our forecast (56.0 pts). The PMI thus broke the record set a month ago, setting a new all-time high. The increase of the index resulted from higher contributions of all its components (for new orders, current output, inventories, delivery times and employment). In the structure of the data, noteworthy is the marked increase in the components for new orders (the highest level since February 2014) and current output (the highest level since January 2017). At the same time, there was a further increase in delivery times (a new record) and an increase in the production backlog (a new record), which was reflected in both higher prices for intermediate goods and materials used in production (a new record) and output prices (a new record). Such data structure indicates a strong overheating in the Polish processing industry.

Are the supply barriers in global manufacturing starting to weaken?

Both the preliminary PMI index for German manufacturing published last week (see MACROmap of 28/6/2021) and today's Caixin PMI for Chinese manufacturing indicated a decline in the indices for production backlogs and prices of intermediate goods and materials used in production, as well as an accompanying lower extension of delivery times than a month ago. This may suggest that supply barriers are slowly beginning to weaken, although they remain very high, limiting the scale of the recovery in global manufacturing. This is consistent with our assessment that the coming months will bring greater material availability and unblocking of global supply chains, which will support further recovery in Polish manufacturing (see MACROpulse of 1/6/2021).

Upside risk to our Q2 GDP forecast

The average PMI for the Polish manufacturing sector rose to 56.8 pts in Q2 vs. 53.2 pts in Q1. Thus, today's data indicate upside risk to our forecast, according to which Poland's GDP increased by 11.2% YoY in Q2 vs. a 0.9% decline in Q1.

Today's business survey results for Polish manufacturing are slightly positive for the PLN and the yields on bonds.

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