Polish Manufacturing Expands as Growing Orders Signal Recovery

Poland’s manufacturing expanded for the first time in 16 months, adding to signs of a nascent recovery in the European Union’s largest eastern economy, according to HSBC Holdings Plc.

The purchasing managers’ index, a gauge of manufacturing, rose to 51.1 in July from 49.3 in June, HSBC said today, citing data compiled by Markit Economics. That was the strongest reading since January 2012 and above the median estimate of 50 by 17 economists surveyed by Bloomberg. A result above 50 indicates expansion and a figure below that shows contraction.

Retail sales and industrial output grew faster than predicted in June, adding to evidence that Poland is emerging from its deepest slowdown in more than a decade. The central bank said last month it was done with cutting interest rates as the record-low borrowing costs should ensure a gradual recovery.

“The PMI survey is yet another data piece that shows that the Polish economy has bottomed in the first half of 2013,” Agata Urbanska, an economist for central and eastern Europe at HSBC in London, said in an e-mail. “Going forward, the big question is about the pace of recovery.”

The zloty strengthened 0.5 percent to 4.2342 per euro at 10:47 a.m. in Warsaw. It has gained 2.4 percent in the past month, the best performance among 24 emerging-market currencies tracked by Bloomberg. The benchmark WIG20 stock index climbed 0.8 percent to 2,345.94 advancing for a fourth day.

‘Proven Wrong’

Output expanded for the first time since April 2012 and new orders grew at the fastest pace since April 2011 as manufacturers start to benefit from rebounding demand from the euro area, Poland’s biggest export market, according to HSBC.

At the same time, companies continued to shed jobs as they faced spare capacity and a decline in the volume of outstanding business, HSBC said.

“Those who thought the economy will succumb to stagnation have been proven wrong,” Grzegorz Maliszewski, chief economist at Bank Millennium SA, said by phone from Warsaw today. “At the same time, the growth continues to stay weak, which doesn’t encourage companies to boost employment, supporting the argument that rates will stay low for an extended period.”

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