Polish Industry Unexpectedly Expands, Backing Rate-Cut Calls

Polish industrial output unepxectedly rose in January, adding to arguments for the central bank to continue cutting interest rates.

Production rose 0.3 percent in January from a year earlier after decreasing 10.6 percent in December, the Central Statistical Office in Warsaw said today. The median estimate of 26 economists in a Bloomberg survey was for a 3 percent contraction. Output rose 5.4 percent from the previous month.

The central bank is maintaining its easing bias, meaning a fifth straight quarter-point cut or unchanged rates are “equally probably” when the Monetary Policy Council meets next month, Governor Marek Belka said Feb. 6. While policy maker Adam Glapinski called last week to halt the rate cuts, today’s better-than-forecast data will probably lead to an interest-rate reduction next month, according to Bank Pekao SA.

“The underlying situation in industry is more or less stable,” Marcin Mrowiec, chief economist at Bank Pekao, said by phone yesterday. “The Monetary Policy Council will cut in March because the data are weak and there’s still work to be done as they started too late and haven’t cut enough so far.”

The zloty traded at 4.1673 per euro at 2:13 p.m. in Warsaw from 4.1865 yesterday. It has strengthened 3.3 percent in the past three months, the sixth-best performance among more than 20 emerging-market currencies tracked by Bloomberg.

Euro Crisis

Poland relies on the euro area, whose recession deepened in the fourth quarter, to buy more than half of its exports. Economic growth in the European Union’s biggest eastern economy slowed to 2 percent last year from 4.3 percent in 2011.

The Warsaw-based Narodowy Bank Polski in May became the only EU central bank to raise interest rates last year. It began its monetary easing cycle in November, a year after the European Central Bank.

Corporate employment fell 0.8 percent on the year in January, the biggest drop since Feb. 2010, the statistics office said yesterday. Average wages grew 0.4 percent on the year in January, the weakest nominal increase since May 2003, it said in a separate release yesterday.

Producer prices fell 1.2 percent in January from a year earlier, the statistics office said today in a separate report. That compared with a median estimate for a 1.1 percent decline in a Bloomberg survey of 19 economists. Producer prices rose 0.1 percent from December.

To contact the reporter on this story: Aaron Eglitis in Riga at aeglitis@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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