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Disappointing industrial output data point to deepening economic slowdown


Industrial output growth slowed sharply in June, having posted a modest uptick in the preceding month. This came as a major surprise to the market, which had anticipated a similar growth rate as in May, especially considering a very low comparative base.

In our view, part of the explanation for the weakness of industrial output in June could lie in fewer working days compared with June 2011 and in the fact that because of Euro 2012, more workers took days off during the month than is usual for this time of year. Above all, however, it testifies to a progressive slowing of economic activity, amid deteriorating conditions in the eurozone and dwindling export orders. Nor is the domestic market picking up the slack: with the situation on the labour market remaining difficult, consumption is losing steam, and infrastructure investments related to Euro 2012, which have served as a major engine of economic growth in recent years, are gradually being completed.

Industrial output could accelerate moderately in July, due to a low base of comparison and more working days than a year earlier. However, it might well slide into negative territory in the months that follow, as the comparative base will be significantly higher. As long as the eurozone debt crisis remains unresolved and unless the global economy recovers, industrial output in Poland is unlikely to return to the high growth rates it enjoyed last year.

Paweł Sionko
Construction Market Analyst, PMR

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