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Polish Manufacturing Growth Slows for Second Month in May

June 01, 2011

(Updates with HSBC comments in third, ninth paragraphs.)

June 1 (Bloomberg) -- Polish manufacturing growth unexpectedly slowed for a second month in May, increasing pressure on the central bank to leave interest rates unchanged this month.

A composite index based on a survey of purchasing managers at more than 200 manufacturing companies dropped to 52.6 from 54.4 in April, HSBC Holdings Plc said today based on a survey by Markit Economics. The median estimate of 14 economists surveyed by Bloomberg was 54. A reading above 50 indicates expansion.

“The pace of growth slowed markedly, with output, new orders and input buying all rising at weaker rates compared to April,” HSBC said in an e-mailed statement. “The slower rise in new orders resulted in a moderation of output growth in May.”

Polish companies including furniture maker Nowy Styl Sp. Z o.o. and ES-System SA, a Warsaw-listed lighting manufacturer, have delayed expansion plans because of lower-than-expected demand. Some members of the central bank’s Monetary Policy Council have said “excessive” interest rate increases may choke off corporate investment and slow economic growth.

Fixed investment rose an annual 6 percent in the first quarter, the Central Statistical Office said yesterday, missing the 10.8 percent median forecast in a Bloomberg survey of six economists. The economy expanded 4.4 percent from a year earlier in the first three months of the year, compared with 4.5 percent in the final quarter of 2010.

Rate Increases

That pace of economic growth is in line with central bank forecasts and gives “no additional argument for a rate increase,” Marcin Mrowiec, chief economist at Bank Pekao SA, said before the PMI survey was published.

The zloty gained to 3.9516 against the euro by 9:22 a.m. today in Warsaw from 3.9489 yesterday.

The PMI report may point to another month of slower industrial output growth after the indicator weakened to an annual 6.6 percent in April, the lowest since October 2009.

“The decline primarily reflected weaker contributions from the output and new orders components and, to a lesser extent, stocks of purchases,” HSBC said. “The slower rise in new orders resulted in a moderation of output growth in May.”

Nowy Styl halted plans to build a 60 million-zloty ($22 million) production line this year because of “poor market sentiment,” Chief Executive Officer Adam Krzanowski said at a news conference in late April.

ES-System suspended investment in a new plant in Dobczyce, southern Poland, because of lower-than-expected demand for solar panels in Europe, CEO Boguslaw Pilszeczek said at a news conference on May 12.

Price Rises Slow

“The rate at which manufacturers raised their prices also slowed sharply,” while “pressure on manufacturing capacity eased somewhat in May,” HSBC said today.

The central bank on May 11 unexpectedly raised its main interest rate by a quarter-point to 4.25 percent, the third increase this year, as it sought to curb inflation that has exceeded its target for seven months.

Investors in the derivatives market are betting on a half percentage-point rate increase by the end of the year. The difference between six-month forward-rate agreements, used to lock in borrowing costs in the future, and the three-month Warsaw interbank offered rate stands at 60 basis points.

--With assistance from Barbara Sladkowska in Warsaw. Editors: Andrew Langley, Willy Morris

Monika Rozlal in Warsaw at

To contact the reporters on this story: Dorota Bartyzel in Warsaw at

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

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