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Slower activity growth in Poland’s industrial sector


May was the third consecutive month that industrial output increased at a rate significantly below 10% y-o-y. The relatively modest pace of output growth observed last month was partly a result of a higher reference base, but it also reflected a weaker increase in demand, particularly external demand. Although this year May came with one more working day than a year earlier, the effect on output was limited by the fact that many Poles took this day (2 May) as an additional day off, thus prolonging their bank holiday weekend.

If one examines the performance of specific manufacturing sub-sectors, it is particularly noteworthy that output in “other non-metallic mineral products”, a sector that includes building materials, surged by 26.8% y-o-y. This reflects strong activity in the construction sector, where output jumped by 23.9% y-o-y in May, chiefly thanks to a resurgence in infrastructure projects. At the same time, the sharp output fall in the computer, electronic and optical products sector is a consequence of a very high comparative base (in May 2010 production in this sector soared by 95.4% y-o-y).

Factors such as the turmoil in the Arab countries and even more importantly the fiscal woes of the eurozone and persistent uncertainty over the strength of the global recovery, are having a dampening effect on business activity and demand. The slower rate of increase in industrial output is also a result of accelerated price growth over the past several months. In our view, although the overall situation in the industrial sector remains good, one should not expect any significant strengthening of activity here in the near future. We forecast that in the coming months the rate of industrial output growth will remain moderate but will stay above 5% y-o-y.

Paweł Sionko
Construction Market Analyst, PMR

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