Polish manufacturing sector shrinks first time in 13 months
August 4, 2014
Poland's manufacturing sector purchasing managers' index PMI, a gauge of manufacturing, fell to a recessionary reading of 49.4 points in July, a PMI report by HSBC and Markit showed, increasing market expectations for rate cuts amid negative signals that the economy may slow further down as sanctions damage trade with Russia.
“These data are surprising and below expectation. This is a significant moment as we have gone from the expansion phase to decline. The situation unambiguously shows that we are heading into a slowdown phase”, BGZ Economist Dariusz Winek said.
The 50 reading for PMI separates expansion from contraction. The index had registered 50.3 in June.
"New orders fell during the month, as did new export business, leading to a near-stagnation in output," HSBC reads.
The headline indicator has now fallen for five months running since a 38-month high in February.
The central drop in new orders was the fastest since April 2013, authors added. "New export business weighed on inflows of total new work as new export orders fell for the third month running and at the fastest rate since October 2012."
With production stagnating and orders down, input purchasing is down and input inventories in turn.
“This is yet another signal that will translate to a further increase in market expectations for rate cuts . . . the last series of data brought almost exclusively disappointments and the PMI reading is another one of them”, BZ WBK Economist Piotr Bielski said.
Poland has held the benchmark interest rate at a record low of 2.50 % since July 2013.
The PMI index was also likely impacted by the new EU sanctions imposed on Russia, economists say.
On Wednesday, Russia announced a ban on most fruit and vegetable imports from Poland, which Warsaw called a revenge for the fresh EU sanctions imposed a day earlier.