Afternoon analysis 19.12.2016

The Polish industrial production increased 3.3% against a 1.3% decline in the prior month. The Polish retail sales growth was the largest in two years.

Positive data from Polish economy

Today, the Polish Central Statistical Office (GUS) informed that industrial production increased 3.3% for November, against the expected 1.8% growth and the 1.3% decline for October. This was a 1.9% increase in comparison to October. This index was also a positive surprise in comparison to the average from 2010. During the past four years, industrial production was decreasing in November, but it managed to grow this year.

In the Year over Year interpretation, the best results were quoted in the water supply sector (6.9%) and the industrial processing sector (4.3%). However, activity in the mining sector decreased by 0.5%. Twenty-four out of thirty-four industrial segments quoted an increase in production. Even though the building production decreased by 12.8% YoY, this data was better than expectations (approximately negative 20%), as well as than the November average (negative 15.8%). Moreover, this index was 5.4% higher in the Month over Month interpretation. In comparison to the average production from 2010 over the past five years, this index had been decreasing in November, whereas it increased this year.

Today, GUS also published the retail sales data for November. The result was at the level of 6.6% YoY (current prices) and appeared to be the best since March 2014. Moreover, it was definitely better than the market expectations (4.8%), as well as the reading for October (3.7%). The best results were quoted in the sale of food, beverages and tobacco products (14.2%), textiles (10.9%), furniture and electronics (7.6%). The growth between January and November was at the level of 5.6, against 3.4% in the same period last year.

Today’s data takes the risk of a very weak GDP growth for the fourth quarter further away. The data for December will be crucial for this index. The zloty’s reaction to the data was relatively limited. The euro went below 4.41 PLN. However, this was mainly caused by depreciation of the EUR/USD rate. The situation was similar in the case of the GBP/PLN. Appreciation of the Polish currency was mainly caused by the global weakness of the pound. Today, the zloty was slightly weaker, because it lost approximately 0.3% of its value against the forint.

Tomorrow’s events

At 8.00 AM, Destatis will publish the PPI data for November. This price index has been decreasing every month in the Year over Year interpretation in more than three years. However, its declines have been increasingly lower since May. In October, this index was at the level of negative 0.4%. Moreover, its growth in the Month over Month interpretation was at the level of 0.7%, which was its highest growth since January 2013.

This tendency confirms the recently quoted higher inflation growth (not only in Germany), caused by the recent increase in oil prices. The market expects that that production inflation will be at the level of negative 0.2% YoY and positive 0.1% MoM, for November.

At 10.00 AM, the European Central Bank (ECB) will present the data regarding the euro zone’s current account for October. This index has been decreasing since March (36.4 billion euro). In September, it reached the level of 25.3 billion (vs expected 31.1 billion) and was at its lowest level since February. A low result of the current account translates to a low demand for the euro. However, the euro zone’s current account is currently still at its historically high level.

The last time this index was at a negative level was at the beginning of 2012. Since then, it has been gradually increasing. Even though this data is significant in the long-term, it will most likely have a limited impact on the euro. The market is currently dominated by the recent decisions from the Federal Reserve and from the ECB, as well as the announcement of fiscal stimulation in the USA.