The beginning of the end for Polish industry’s multi-year stagnation
After several consecutive disappointments, industrial production surprised positively, growing by 1.2% yoy. Nevertheless, several such months are needed to end the years-long stagnation of Polish industry. A sustainable rebound in foreign demand (i.e. European) will be crucial here.
Industrial production increased by 1.2% yoy in April, closer to our optimistic forecast (1.8% yoy) than to the consensus (-0.4% yoy). This means a slight slowdown compared to March (2.4% yoy) – milder than would have been suggested by the unfavorable calendar (drop in working day count).
Regarding the structure of industrial production, we are unable to say more than what we have included in our previous comments. Since the beginning of the year, there has been a certain divergence between the growth rates of sectors producing for investment and – more broadly – primarily for the domestic market, and the industries focused mainly on exports. April was similar in this respect, although the relative weakness of export sectors is diminishing – in the last month, production in most of them grew on a yoy basis. The biggest drag was the chemical industry (-8% year-on-year).
Industrial output (February 2020 = 100%, seasonally adjusted)
Source: Statistics Poland, Macrobond, Pekao Research
In monthly terms, production increased by 1% (s.a.). This is a decent result (the best since October last year), but its significance should not be overstated. Let's place the April reading in a broader context: Polish industry has been in a multi-year stagnation (since early 2022) and a 1% increase in production changes nothing in this regard. To talk about a breakthrough, we need several such months – the historical trend of Polish industrial production is around 6% annually, and production is currently still almost 3% lower than in March 2022. For this to become a reality, we need an improvement in foreign demand, mainly from Western Europe, which is struggling with its own problems. The signals from there are positive (PMI, industrial production), but according to all available data, we are at a relatively early stage of recovery there. For this reason, industrial production should accelerate in the coming months – we assume that it will grow by an average of 6.5% for the rest of the year. So, it is not the end of industrial stagnation, but rather the beginning of the end. Finally, it is worth noting that today's production reading is the first solid reading on economic activity in the second quarter. The fact that we are starting with good data supports bodes well of GDP acceleration in this period.
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