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Polish November PMI Drops to Lowest in Two Years on Exports

Dec. 1 (Bloomberg) -- Polish manufacturing contracted in November to the lowest level in more than two years as export orders fell amid the worsening debt crisis in the euro region, Poland’s main market.

The purchasing managers’ index, a gauge of manufacturing, fell to 49.5, the lowest level in 25 months, from 51.7 in October, HSBC Holdings said in an e-mailed statement summarizing the results of a survey by Markit Economics. The median estimate of 16 economists in a Bloomberg survey was for 50.7. A reading above 50 indicates expansion.

The euro area, whose manufacturing index fell to 46.4 in November, the lowest since July 2009, is already in a “mild recession,” the Paris-based Organization for Economic Cooperation and Development said this week, warning the region “represents the key risk to the world economy.” Poland, the only EU nation to maintain growth in 2009, sells 55 percent of its exports to the 17-member bloc.

“The probability of a deep slowdown is rising quickly,” Citibank Handlowy’s chief economist Piotr Kalisz wrote today in a note to clients. “Weak demand among Poland’s key trading partners is weighing on economic activity and we expect this will also lead to a more substantial slowdown in fixed investment in the coming quarters.”

Brace for Disappointment

The zloty traded at 4.5 per euro at 11:40 a.m. in Warsaw, unchanged from yesterday. The yield on the government’s five-year bond rose 0.4 basis points to 5.28 percent.

New export orders fell for a sixth month, while outstanding business also declined and the volume of inputs ordered dropped for the third time in six months, weakening at the fastest pace since July 2009 as local demand ebbed.

“We have observed export growth slowing from the beginning of the year, but so far domestic demand has been holding up well,” Agata Urbanska, a central and eastern European economist at HSBC, said in an e-mailed comment. “Today’s reading suggests we should brace for more disappointing activity data in the coming months, not only for exports but also the domestic demand indicators.”

‘In Tremendous Shape’

Poland’s economy grew 4.2 percent from a year earlier in the third quarter, faster than economists forecast, boosting the probability that full-year growth will exceed last year’s 3.9 percent, Deputy Finance Minister Ludwik Kotecki said yesterday by e-mail. The figures “show the Polish economy isn’t really slowing and is even in tremendous shape when compared with the rest of Europe,” central bank Governor Marek Belka told TVN CNBC.

The PMI data bolster the argument that policy makers are “probably understating the risks of a slowdown in Poland,” said Citibank’s Kalisz, who sees the economy growing 1.9 percent next year as the central bank cuts rates by 75 basis points.

The bank, which forecasts 2012 economic growth of 3.1 percent, will leave its main interest rate unchanged at 4.5 percent for a sixth month next week, according to all 15 economists surveyed by Bloomberg News. Poland’s government forecasts 2.5 percent growth.

Forward-rate agreements, used to speculate on central bank rates, were nine basis points below the Warsaw Interbank Offered rate today, compared with a quarter-point reduction indicated on Nov. 11, according to data compiled by Bloomberg.

“The data, with the PMI back in contraction territory for the first time since October 2009, is very important and a reminder that Poland will not stay isolated from the European growth slowdown,” HSBC’s Urbanska wrote.

To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net

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

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