PMI for Polish manufacturing increased from 53.8 pts in October to 54.4 pts in November, running above our forecast (53.0 pts) and market consensus (54.0 pts). The PMI increase resulted from higher contributions of 3 out of its 5 components (new orders, current output and inventories), while lower contributions of employment and delivery times had the opposite effect.

The Markit report concerning the data published today points to the continuation of the trend observed in the Polish manufacturing sector over the last couple of months, i.e. an increase in the current output, which is driven by the increasing number of domestic orders on the one hand, but curbed by supply constraints on the other. Export orders fell for the third consecutive month. In accordance with the press release, a decline in the number of foreign contracts reflected the customers’ increasing difficulties in finding funds for new purchases, which are becoming increasingly expensive.

It is worth noting that at least 82% of manufacturing companies reported that the prices of production means went up in November, while at least 71% of them reported an increase in the prices of finished products. The growing prices impacted both the foreign demand and the decisions taken by the Polish companies with regard to purchases. With prices growing on a massive scale and expected to keep on growing, the companies decided to increase the scale of the purchase of goods to counteract the impact of inflation and supply shortages in the coming months. Consequently, we saw the strongest net growth in inventories of inputs and semi-manufactured goods in over 23-year-long history of the survey.

Employment in the manufacturing sector fell for the first time since August 2020, and it was a new consequence of supply constraints. The report shows that some companies introduced layoffs. At the same time, other companies reported difficulties in finding new employees.

Supply constraints and further inflation rise concerns led to a deterioration in companies’ sentiments regarding the outlook for the activity in the manufacturing sector. It has been reflected in the index of expected output for 12 months, which fell for the fifth consecutive month.

The average PMI for October-November (54.1 pts) ran below the average index value reported for Q3 2021 (55.6 pts), which is indicative of the activity slowdown in the manufacturing sector in Q4 2021. Nonetheless, PMI for November was above the consensus. Therefore, like other data published over the last two weeks: GDP for the third quarter, industrial production or retail sales in October, the today’s data is also better than expected. The data referred to above indicate that there is a significant upside risk to our economic growth forecast for 2021 (4.9%). We will provide our revised macroeconomic scenario in the next MACROmap.

In our opinion, today’s data is slightly positive for the PLN and the yields on Polish bonds.

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