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Polish Manufacturing Falls Most in 45 Months on Slowdown

Poland’s manufacturing shrank the most in 45 months in April, a sign that the European Union’s largest eastern economy continued to slow and may need more interest-rate cuts, according to HSBC Holdings Plc.

The purchasing managers’ index, a gauge of manufacturing, fell to 46.9 from 48 in March, HSBC said today in a statement on Markit Economics’s website. That was the weakest reading since July 2009 and below the 47.8 median estimate of 21 economists surveyed by Bloomberg. A result above 50 indicates expansion, while a figure below that shows contraction.

Poland is seeking to avoid the steepest slowdown in more than a decade as demand for its exports from the euro area wanes while rising unemployment curbs consumer spending. The central bank is meeting next week and some policy makers have indicated they will seek a resumption in monetary easing after the pause last month.

“The April manufacturing PMI index delivers a significant disappointment,” Agata Urbanska, an economist for central and eastern Europe at HSBC, said by e-mail. “Weak activity data and weak leading activity indicators matched with below-expectations inflation will keep up pressure for further interest-rate cuts.”

The zloty strengthened 0.2 percent to trade at 4.1522 per euro by 10:29 a.m. in Warsaw after the report, paring its loss to the common currency to 1.6 percent since the start of 2013.

The contraction deepened because of “sharper declines” in output and new orders, HSBC said. Manufacturing employment fell for the eighth month, the longest streak of job shedding in almost 3 1/2 years, according to the report.

No Vote

Polish central bankers didn’t vote on rate cuts in April after reducing borrowing costs to a record low in the previous five months because of “ambiguous” signs of a recovery, minutes of the meeting showed last week.

Since then, Anna Zielinska-Glebocka and Jerzy Hausner, two of the Monetary Policy Council’s 10 members, said they won’t rule out a rate in May.

A recession in the 17-nation euro area, which buys 52 percent of Polish exports, and “restrictive” monetary policy at home have forced the government to lower its growth forecast to 1.5 percent this year, which would be the slowest pace in 11 years, Finance Minister Jacek Rostowski said last week.

The European Central Bank will cut borrowing costs today, according to 45 of 70 economists surveyed by Bloomberg after a month in which inflation plunged, economic confidence slumped and unemployment rose. The Ifo institute index of business climate in Germany, Poland’s biggest trading partner, fell for a second month in April.

While export orders in Polish manufacturing improved in April from a month earlier, “there are downside risks building up” amid weak sentiment indicators in the euro area, HSBC said.

The council “might be forced to consider reopening of the easing cycle even earlier than it implied, i.e., ahead of the new inflation report due in July,” Urbanska said.

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