Bloomberg News

Polish Output Growth Slows, Suggesting Recovery Is Fading

July 19, 2011

(Adds comment in ninth paragraph, updates zloty in eighth.)

July 19 (Bloomberg) -- Poland’s industrial output slowed in June to the lowest growth rate in 20 months, missing economist estimates and supporting central bank forecasts that the economy will lose steam in the second half of this year.

Industrial production expanded 2 percent from a year earlier after growing 7.7 percent in May, the Central Statistical Office in Warsaw said today. The median estimate of 21 economists surveyed by Bloomberg was 5.7 percent. Output rose 1.1 percent on the month.

The central bank last week lowered its forecast for 2011 economic growth to 3.2 percent from 3.6 percent amid signs the euro area’s sovereign debt crisis is spreading and may damage the bloc’s recovery. Poland’s purchasing managers’ index, a gauge of manufacturing, dropped to its lowest level in 18 months in June as new orders fell and exports declined.

“Very low manufacturing growth of 1.9 percent shows that new orders, including foreign orders, are weakening,” said Monika Kurtek, chief economist at Bank Pocztowy in Warsaw. The figure was also depressed because of the base effect created by 14.3 percent growth in the year-earlier period, she said.

Concern that the global economic recovery may grind to a halt is increasing as Europe’s debt crisis worsens and U.S. officials struggle to reach agreement on how to avoid a debt default. Investor confidence in Germany, Poland’s biggest trading partner, fell to the lowest in 2 ½ years in July, the ZEW Center for European Economic Research said today.

Interest Rate Implications

Today’s industrial output report followed the release on July 1 of a purchasing managers’ survey that showed Polish manufacturing growth may drop further in the third quarter. Ruch SA, a chain of shops that sells almost half of Poland’s newspapers, plans to cut more than half of its jobs this year, the newspaper Parkiet reported July 5.

The zloty held on to gains against the euro after the report and traded at 4.0177 at 3:17 p.m. in Warsaw, up 0.5 percent on the day. The yield on the two-year Treasury bond maturing July 2013 was little changed at 4.73 percent, compared with 4.74 percent late yesterday.

Poland’s central bank this month kept its benchmark interest rate at 4.5 percent, the highest since December 2008, after four increases this year.

“Such weak data from the real economy is a sign to postpone further rate increases, or even of the end of the tightening cycle,” BRE Bank SA economists led by Ernest Pytlarczyk wrote in a note to clients after the release.

Producer prices, an early indicator of inflationary trends, rose 5.6 percent from a year earlier in June, compared with the median forecast of 5.5 percent in a Bloomberg survey of 18 economists, the statistics office reported today. Producer prices rose 0.3 percent on the month.

--With assistance from Monika Rozlal and Barbara Sladkowska in Warsaw. Editors: Willy Morris, Andrea Dudikova

To contact the reporters on this story: Dorota Bartyzel at Katya Andrusz at

To contact the editor responsible for this story: Balazs Penz at

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