PMI for Polish manufacturing below expectations
The PMI index for the Polish manufacturing sector shrank from 59.4 pts in June to 57.6 pts in July, running below the market consensus (59.0 pts) and our forecast (58.0 pts). The index was driven down by lower contributions of 4 out of its 5 components (new orders, current output, inventories and employment), while slightly longer delivery times (a new all-time high) had an opposite impact. Nonetheless, the backlogs of work did not grow as fast as in June, when they had hit a record high, even though the delivery times kept on getting longer. This was reflected in a slower growth in the prices of both semi-finished goods and materials used for production and the output prices. It is worth noting that the price growth rate in those categories fell down for the first time since September and November 2020, respectively. The structure of data shows that the situation with supply barriers in the Polish manufacturing sector improved slightly in July.
Poorer demand in Germany slightly negative for Polish manufacturing
An assessment of the situation in the German manufacturing sector is a key to the outlook for supply barriers in that sector in Poland. Preliminary PMIs in Germany have shown an increase in the “backlogs of work" component accompanied by an increase in the prices of both semi-finished goods and materials used for production and the output prices (new all-time highs in both cases). This suggests that the slight improvement of the situation with supply barriers in the Polish manufacturing sector mainly resulted from a poorer demand for intermediate goods manufactured in Poland due to bottlenecks in the German manufacturing sector (see MACROmap of 26/07/2021). This assessment is supported by the “new export orders” component for the Polish manufacturing sector falling to the lowest level since December 2020. We believe that high supply barriers in Germany will be curbing the recovery in the Polish manufacturing sector in the months to come. A slower growth in the number of orders will be conducive to a reduction in the backlogs of work in the Polish manufacturing sector and curbing the price growth pressure with regard to semi-finished goods, materials used for production and the output prices.
Today’s data is slightly negative for the PLN and yields on Polish bonds.