Polish Manufacturing Gauge Has Second-Largest Drop Since 2008

  • PMI fell to 51 last month, worse than every forecast in survey
  • Economy slowed in first quarter after late 2015 growth burst

A gauge tracking Poland’s manufacturing industry had its second-biggest one-month decline since the global financial crisis in late 2008, marking “an abrupt loss of momentum” at the start of the second quarter, according to Markit Economics.

The Purchasing Managers’ Index fell to 51 last month from 53.8 in March, remaining above the 50 threshold that separates contraction from growth, Markit said in a statement on Monday. April’s reading, which dropped below the figure for the euro area, was worse than than every forecast in a Bloomberg survey of 16 economists, whose median estimate was 53.

“The Polish manufacturing sector lost all the momentum gained since January,” Trevor Balchin, senior economist at Markit, said in the statement. “Moreover, a marginal rise in new orders suggests that overall conditions in the sector will remain subdued in May.”

A burst in economic expansion in late 2015 has fizzled out last quarter as the new government rolls out measures to prop up demand. Growth decelerated “sharply” from March in manufacturing output, new orders and employment, according to Markit.

The stumble will heap more pressure on the central bank, which has pointed to one of the European Union’s fastest economic gains as it kept borrowing costs unchanged since March 2015 despite the longest bout of deflation in 60 years.

Slower Growth?

Six-month forward-rate agreements, derivatives used to speculate on borrowing costs, traded 12 basis points below the Warsaw Interbank Offered Rate on Monday, compared with this year’s high of 38 basis points in January.

The zloty depreciated 0.2 percent to 4.3807 against the euro as of 10:28 a.m. in Warsaw. It was the worst performer against the common currency in April among its 24 emerging-market peers with a 3 percent loss. The yield on 10-year zloty government bonds slipped one basis point to 3.08 percent.

While gross domestic product jumped 4.3 percent in the last three months of 2015, growth slowed to 3.4 percent in January-March, according the median of 13 estimates in a Bloomberg survey conducted April 22-27.

Declining unemployment and the government’s program of child benefits are set to put Poland’s expansion back on track, according to forecasters including the central bank, which sees the economy growing 3.8 percent this year and next.

‘Fiscal Impulse’

While average input prices in Polish manufacturing fell for an eighth month in April, the longest run of negative cost pressures since the survey began in June 1998, Markit said deflation moderated to “a marginal pace” last month. Output prices rose for the second time in almost four years, suggesting “returning inflationary pressures,” Markit said.

The economic outlook for this quarter “remains balanced,” according to Jakub Rybacki, an economist at ING Bank Slaski SA in Warsaw.

Looking at the “broader picture we should rather witness a slight GDP dynamics acceleration in the second quarter after a temporary slowdown in the first quarter,” Rybacki said in a report. “The fiscal impulse should stimulate production.”

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