Markedly better than expected production data

According to GUS data, industrial production sold by enterprises employing more than 9 people rose by 11.1% YoY in December, vs. a 5.4% increase in November, which was significantly above our forecast (10.0%) and the market consensus (8.7%). The main reason behind the accelerated industrial production growth between November and December was the low base effect. In December 2019, the seasonally adjusted production fell by 2.9% MoM, which was (leaving aside the collapse of production during the 2020 pandemic) its sharpest decline since December 2013. Seasonally adjusted industrial production increased by 0.5% between November and December last year. We estimate that the industrial production in December was 7.1% higher than in February last year.

Wide range of recovery in domestic industry

The recovery of activity in Polish industry was wide ranging, with 28 out of 34 industry sectors recording year-on-year output growth in December. Increased activity in categories with a significant share of export sales in revenues was the main source of growth in industrial production. We estimate that in divisions where the share of exports in sales exceeds 50%, industrial production grew by 18.0% YoY in December (the fastest growth since December 2010) compared to 12.5% in November. A factor influencing output growth in export industries is the gradual recovery in global trade, which was previously signalled by December business survey results for manufacturing in China and the Eurozone, including Germany. PMI data for the Eurozone published last week signals good conditions for the growth of Polish exports and industrial production also in January this year (see MACROmap of 25/01/2021).

Production in other segments of Polish industry also achieved high growth rates in December. We estimate that production growth rate in construction-related industries reached 14.1% YoY (the highest since July 2018), and 6.8% YoY (the highest since April 2019) in other industries. Such result is consistent with the recovery in construction activity observed in December (see MACROpulse of 22/01/2021).

GDP growth in Q4 2020 above expectations

Industrial production data released today indicates that industrial activity in December was characterized by high resilience to the tightening measures introduced in November and extended in December in connection with the intensifying COVID-19 pandemic. Given today's better-than-expected data, as well as the positive tone of December's labour market and construction data (see MACROpulses of 21/01/2021 and 22/01/2021), we have revised upwards our forecast for GDP growth in Q4 2020 to -1.8% YoY. Our economic growth forecast for the following quarters (+3.6% YoY on average in 2021) is subject to uncertainty regarding further course of the epidemic, the pace of vaccine distribution and the risk of another wave of cases in Q1 this year.

Today’s better-than-expected industrial production data for December is slightly positive for the PLN and bond yields.

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