Marked improvement in the situation in Polish manufacturing
PMI for Polish manufacturing increased from 44.5 pts in October to 48.7 pts in November, printing ahead of market expectations (45.4 pts) and our forecast (45.5 pts). This means the index in October reached its highest value since April 2022. Nonetheless, it remained below the 50-point level separating growth from contraction for the nineteenth month running.
The index value was driven up primarily by total new orders, which were declining, but at a slower rate than before. Like in October, the total orders component rose more substantially than the one for export orders, which suggests that the increase in demand was driven by the incoming domestic orders, boosted primarily by higher consumer demand. PMI was also driven up by rising indices for current output, employment and suppliers' delivery times. Even though the current output value for November printed below 50 points, it still reached the highest level since February 2023, which suggests that the decline in activity in the Polish manufacturing sector has markedly decelerated.
Signals of inventory cycle reversal
November saw the commodity price component rising substantially, and going up above the 50-point mark for the first time since March. The component for the prices of production sold also rose markedly, though its level still indicates that the prices are falling. In our opinion, the data shows that the improvement in the number of new orders cited above and the increasing input prices are driving the output prices up. This, in turn, is curbing the inflation fall in Poland amidst the consumer demand recovery.
In our opinion, the most important signal coming from the November survey is a clear reversal of the negative trend affecting the purchases of items and the inventories of finished goods. The item purchases component, though still running below 50 points, reached the highest level since May 2022. The value of the finished goods inventories component was indicative of a marked increase in inventories, as it reached its highest level since July 2022. In our opinion, those trends are signalling a reversal in the cycle of inventories, which was curbing the activity in the manufacturing sector and slowing the GDP growth down (see MACROpulse of 30/11/2023). Our conclusion is supported by the PMI index for production expected in a 12-month horizon, which rose in November to reach the highest level since February 2022.
It is worth noting that the PMI for October-November (46.6 pts) went markedly above its average value for Q3 (43.5 pts), which supports our forecast in which economic growth in Poland will accelerate from 0.5% YoY in Q3 to 1.9% in Q4.
In our opinion, today’s data is positive for the PLN and the yields on Polish bonds.