Production growth slowing down significantly due to statistical effects
In accordance with the GUS data, the volume of industrial production sold in enterprises employing more than 9 people increased by 9.8% YoY in July compared to 18.4% in June, running below market expectations (10.8%) and our forecast (10.5%). The main reason for the sharp slowdown in industrial production between June and July were high base effects related to the opening of the economy a year ago: July 2020 saw a strong growth in seasonally adjusted production (+6.0% MoM). The statistical effect arising from an unfavourable difference in the number of business days was another reason behind the slowdown between June and July (in June 2021, their number was the same as in June 2020, while in July 2021, there was one business day less comparing to the previous year). Seasonally adjusted industrial production grew by 0.7% between June and July. We assess that the industrial production level in July was already by 7.7% higher than in the period before the outbreak of the pandemic (i.e. February 2020).
Supply barriers curb productionAs in the previous month, strong statistical effects mentioned above make it difficult to assess trends in individual industry branches precisely. Sector-wise, a significant slowdown in production categories with a substantial share of export sales in the revenues was the main reason behind the slowdown in production growth between June and July. We assess that production growth in exporting sectors fell from 23.5% in June to 7.9% YoY in July. It is particularly worth noting a drop in the “vehicles, trailers and semi-trailers” category (-4.7% YoY in July vs. +17.4% in June). It resulted from some factories experiencing down time due to a shortage of semi-conductors. A shortage of materials caused the figures in the "furniture” category to fall as well (-2.4% YoY in July vs. 13.1% in June). The July PMI for Polish manufacturing has already signalled a negative impact of growing supply barriers on production (see MACROpulse of 02/08/2021). However, in other manufacturing categories, production growth was still relatively high. We assess that production in construction-related sectors grew by 18.6% YoY in July comparing to a 22.6% growth in June, while in other branches (except for exports- and construction-related categories), production increased by 9.1% YoY in July comparing to a 14.2%growth in June.
Supply barriers will force new investments
We believe that in the coming months, the recovery in industrial production will be limited by increasing supply barriers. We still think that supply constraints will be a factor contributing to an increase in gross fixed capital formation by companies in some manufacturing industries in H2 this year. It is consistent with our forecast, in which a strong total investment growth seen in Q2 (12.3% YoY vs. 1.3% YoY in Q1) will continue throughout the second half of 2021 (9.5% YoY on average).
Today's industrial production data have no impact on our forecast, according to which Poland's GDP will grow by 4.9% YoY in Q3 vs. 10.9% in Q2. At the same time, the data are neutral for the PLN and yields on Polish bonds.