Polish Industry Unexpectedly Expands, Muting Rate-Cut Calls

Polish industrial output unexpectedly rose in January, lifting some pressure on 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 probable” 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, boosted by an extra working day compared with January last year, probably still leaves room for an interest-rate reduction next month, according to BRE Bank.

“It’s a very tough call because this is a hawkish Council looking for reasons to justify its go-slow approach, but I think there’ll be cut in March,” Ernest Pytlarczyk, BRE’s head of financial markets research in Warsaw, said by phone. “Disinflation and falling producer prices are consistent with a contraction of gross domestic product in the first quarter.”

Zloty, Yields

The zloty traded at 4.1739 per euro at 2:23 p.m. in Warsaw, gaining from 4.18 before the release and up 0.3 percent on the day, the best performance among more than 20 emerging-market currencies tracked by Bloomberg. The yield on the two-year government bond maturing in July 2015 rose 2 basis points to 3.42 percent, while the one month forward-rate agreement rose 5 basis points to 3.61 percent.

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 from a year earlier 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.

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