Statistical effects the main reason behind a slower production growth
In accordance with the GUS data, the volume of industrial production sold in enterprises employing more than 9 people increased by 8.8% YoY in September compared to 13.2% in August, running above market expectations (8.0%) and our forecast (8.3%). The main reason behind a strong slowdown of the industrial production growth between August and September was the statistical effect caused by an unfavourable difference in the number of business days (in August 2021 there were two business days less comparing to the preceding year, while in September 2021 their number was the same as in 2020). Industrial production growth between August and September was also driven down by the last year’s high base effect. Seasonally-adjusted industrial production increased by 0.9% MoM in September. We assess that the industrial production level in September was 7.9% higher than in the period before the outbreak of the pandemic (i.e. February 2020).
The impact of supply constraints on the exporting sectors is growing ever stronger
Sector-wise, particularly noteworthy is the situation in production categories with a substantial share of export sales in the revenues. We assess that production dynamics in the exporting sectors slowed down from 7.8% in August to 1.1% YoY in September (lowest since June 2020), which suggests that production is still being driven down by supply constraints. This opinion is supported by September’s PMI for Polish manufacturing, which showed that shortages in raw materials and semi-finished goods significantly constrain the companies’ production capacity (see MACROpulse of 01/10/2021). In this context, particularly noteworthy is the progressive production decline in the “vehicles, trailers and semi-trailers” category (-17.3% YoY in September vs. -12.9% in August), resulting from continuing downtime arising from the shortage of semi-conductors in some factories (see MACROmap of 20/09/2021). We assess that production in construction-related sectors grew by 15.0% YoY in September comparing to a 24.6% growth in August, while in other branches (except for exports- and construction-related categories), production increased by 12.8% YoY in September comparing to a 14.2% growth in August, and it is those branches that stabilise the activity in the Polish industry.
Supply barriers will force new investments
We continue to believe that the recovery in industrial production will be limited in the coming months by increasing supply barriers. In our view, supply constraints are a contributing factor to an increase in gross fixed capital formation by companies in some manufacturing industries. However, the continuing, increased uncertainty connected with the approval of the National Recovery Plan having been postponed by the European Commission has the opposite impact on the investment dynamics. We are not changing our forecast, in which the growth in total investments will increase to 13.5% YoY in Q4 vs. 7.6% in Q3 and 5.0% in Q2 (see MACROmap of 04/10/2021).
Today's industrial production data has no impact on our forecast, according to which Poland's GDP grew by 4.5% YoY in Q3 vs. 11.1% in Q2. At the same time, the data is neutral for the PLN and the yields on Polish bonds.