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Industrial output exceeds market expectations


In May industrial output jumped by 14% y-o-y, rising for the seventh month in a row. It was the best result in more than two years, and one that sharply exceeded market expectations, which were for an increase of about 8% y-o-y, amid concerns about the negative impact of the flood. Although the impressive growth figure was partly a result of favourable statistical factors (notably a low reference base), it also reflects an improvement in economic conditions. The strong performance of export-oriented sectors clearly demonstrates that, in addition to the rebuilding of inventories depleted during the crisis, foreign demand is now a significant driver of rising industrial output in Poland. The acceleration of export sales is a reflection of better economic performance abroad, particularly in Germany (the biggest recipient of Polish exports), where recent months brought clear signs of recovery. Another factor supporting export growth is a favourable exchange rate of the zloty, which weakened substantially in May (chiefly against the US dollar, but also to the euro) as a result of the financial turmoil surrounding Greece and other peripheral eurozone members. And the improvement in labour market data raises the prospect that private consumption, too, will begin to recover in the latter part of the year. Therefore we expect a continuation of the robust growth in industrial output in the months ahead. It should be remembered, however, that achieving similarly high growth rates will be more difficult in the second half of the year, because the positive impact of base effects will gradually disappear. We forecast that in 2010 as a whole industrial output will rise by approximately 7%.

Paweł Sionko
Construction Market Analyst, PMR

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