Polish Output Growth Beats Forecast, Reinforcing Rate-Cut Halt

Polish industrial output grew faster than expected in June, reinforcing the central bank’s case for halting rate cuts as the economy begins to recover.

Production rose 3 percent from a year earlier in June, after declining 1.8 percent the previous month, the Central Statistical Office in Warsaw said today. That exceeded the median estimate for a 1.5 percent increase in a Bloomberg survey of 31 economists. Output expanded 2.8 percent from May and gained 3.1 percent seasonally adjusted from a year earlier.

The data follow a report yesterday showing corporate hiring increased in June as Poland’s economy struggles to emerge from its worst slowdown in a decade. The central bank ended its monetary-easing cycle this month because policy makers “are convinced a gradual economic recovery will occur,” Governor Marek Belka said after the Narodowy Bank Polski trimmed its benchmark rate to a record 2.5 percent on July 3.

“It’s important to see if the seasonally adjusted growth rate rebounds from the 1.5 percent decline in May,” Grzegorz Ogonek, an economist at ING Bank in Warsaw, wrote today before the data were released. Belka’s “forward guidance of unchanged rates in the coming six months means the market sensitivity to economic data should be relatively low.”

The European Union’s largest eastern economy will expand 1.1 percent this year, slowing from 1.9 percent in 2012, the central bank said in an inflation report published July 8. The government will allow this year’s budget deficit to widen by 16 billion zloty, or about 1 percent of GDP, as it tries to boost consumption and output, Prime Minister Donald Tusk said yesterday at a news briefing.

The zloty was little changed after the data, trading at 4.2627 per euro at 2:07 p.m. in Warsaw, 0.2 percent weaker from yesterday. The yield on the 10-year government bond rose three basis points to 4.102 percent, extending its rise from yesterday to 18 basis points.

In a separate report, the office said producer prices fell 1.5 percent in June from a year earlier, less than the 1.8 percent median contraction predicted by 27 economists surveyed by Bloomberg. Prices rose 0.5 percent from the previous month.

Konrad Krasuski in Warsaw at kkrasuski@bloomberg.net

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