Contraction of Polish Manufacturing Sector Slows in July
HSBC survey data compiled by Markit indicated a nearstabilisation of business conditions facing Polish manufacturers in July.
New orders declined at the weakest rate since March, while output fell only marginally since June and firms raised headcounts at the fastest rate since February 2011.
The headline HSBC Poland Manufacturing PMI is a composite single-figure indicator of manufacturing performance. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater than 50.0 indicates overall improvement of the sector.
The PMI recovered from June’s 35-month low of 48.0, posting 49.7 in July. That signalled a fourth successive overall deterioration in the business climate, but at only a marginal pace that was the weakest in that sequence.
The downturn in new business received by Polish goods producers stretched to a sixth successive month in July. The rate of contraction slowed from June’s three-year record, however, to the weakest since March.
Weak international demand linked to the Eurozone crisis continued to weigh on overall new business flows in July. The volume of new export orders declined for the twelfth time in the past 14 months, and the rate of reduction remained robust despite easing to the weakest since April.
The sustained fall in new orders resulted in another drop in output in July. That said, the rate of contraction eased to a marginal pace. The completion of outstanding contracts continued to support production
during the month, as backlogs declined at the secondfastest rate in over three years.
The main bright point from the latest survey was a faster rise in manufacturing employment. Job creation was registered for the fourth successive month, and the rate accelerated to the fastest since February 2011.
In line with the trend in new business, the volume of inputs purchased by Polish manufacturers declined for the sixth month running in July. The rate of reduction slowed sharply from June’s three-year record, however.
Survey data indicated a fall in input prices for the first time in three years in July. A number of firms linked lower cost pressures to falling prices for oil-related inputs. Similarly, prices charged for Polish manufactured goods declined for the first time since March 2010. Firms reported that they had lowered their prices due to competitive pressures.
Agata Urbanska, Economist, Central & Eastern Europe at HSBC, said: “The recovery of the PMI index, despite the fact that it still remains in contraction territory, is a positive following a month of activity data releases all surprising on the downside. The PMI still points to a marginal deterioration in business conditions in the manufacturing sector, but the pace of deterioration has slowed compared to previous months.
“The PMI correction is broadly based across all its components. A
positive surprise is that the employment index, which held above the 50 points threshold since April, has improved further in July! That is in contrast with slowing employment growth to date. As we have pointed out last month, with slowing activity data, we remain cautious to read positively into this. Nevertheless, it gives some hope for a moderate growth slowdown scenario.
“Following a drop of the PMI index to 48.7 in 2Q12, the weakest since 3Q09, the July rebound is a positive. Worsening PMI indicators in the eurozone in July still point to downside risks though. ”