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Polish August Industrial Output Slows More Than Forecast

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Oct. 17 (Bloomberg) -- Polish industrial output shrank more than economists estimated last month, raising expectations the central bank will cut interest rates in November to prevent a prolonged economic slump.

Production fell 5.2 percent from a year earlier, the first decline since 2009, after a 0.5 percent increase in August, the Central Statistics Office in Warsaw said today. That was more than the median estimate for a 3.9 percent contraction in a Bloomberg survey of 32 economists. Output rose 6.1 percent from the previous month.

The central bank, the only one in the European Union to raise borrowing costs this year, has kept its main rate at the highest since 2009 even as policy makers around the world ease conditions to avert a global slump. The Monetary Policy Council said after the Oct. 3 meeting that it may cut interest rates in November should new data confirm a “protracted” economic slowdown and “limited” risk of price pressure.

“It’s hard to be optimistic about output growth in coming months with manufacturing PMI and new manufacturing orders at their lowest levels since June 2009,” Wojciech Matysiak, an economist at Bank Pekao SA in Warsaw, wrote in a note after the release.

Justify Cut

The data are a “good justification” for a quarter-point rate cut next month, with further reductions coming in December and March, Matysiak said.

The zloty weakened to 4.1033 per euro at 2:26 p.m. in Warsaw, extending its loss on the day to 0.4 percent. The average yield on the five-year government bond fell one basis point after the data, to 4.08 percent.

Poland’s economy expanded 2.4 percent in the second quarter from a year earlier, the slowest pace in almost three years. On Oct. 12, Prime Minister Donald Tusk, facing down a surging political opposition, won a parliamentary confidence vote after pledging to pave the way for 300 billion zloty ($96 billion) in investments to spur growth in the EU’s biggest eastern economy.

Producer prices, an early indicator of inflationary trends, rose 1.8 percent in September from a year earlier, more than the 1.7 percent median forecast in a Bloomberg survey of 23 economists, the statistics office reported in a separate statement. Producer prices increased 0.5 percent on the month.

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

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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