WORLD CUP MAY HAVE GENERATED SALES OF TVS

Industrial output is surprisingly positive in May

GROWTH in Slovakia’s industrial production accelerated significantly in May, exceeding analysts’ expectations. Production output was 31 percent higher than the same month last year and bettered April’s 21 percent increase. Slovakia’s Statistics Office said it was the strongest growth recorded so far this year.

GROWTH in Slovakia’s industrial production accelerated significantly in May, exceeding analysts’ expectations. Production output was 31 percent higher than the same month last year and bettered April’s 21 percent increase. Slovakia’s Statistics Office said it was the strongest growth recorded so far this year.

“The economic sentiments of the biggest trade partners for Slovakia continued to improve in May, but we did not expect such a significant acceleration in production growth, as our estimate was that the growth pace would be similar to that in April,“ wrote Eduard Hagara, senior research analyst from ING Commercial Banking, in a press release. “The positive feature also is that the growth was not driven by only one or two industrial segments but by almost all of them.”

When seasonal influences are taken into consideration, industrial production in May 2010 increased by 3.2 percent from April and it is lagging only 3 percentage points behind levels recorded prior to the economic crisis, said Dávid Dereník, an analyst with UniCredit Bank Slovakia.

“The production of electrical appliances by three key industrial players in the manufacturing sector (Samsung, Sony and Panasonic) continued to draw Slovak industry back to the pre-crisis level,” he wrote in his memo. “May is in general linked with seasonal influences, but this year was exceptionally good and the production of electrical appliances rose by as much as 20 percent, even after seasonal influences were taken into consideration.”

This large jump was particularly influenced by a significant increase in sales orders of the two biggest manufacturers of TV sets.

“Probably the World Cup in soccer led to more interest in retail purchase of TV sets and had the biggest influence here,” Dereník hypothesised.

Production in the manufacturing sector increased by 35.6 percent year-on-year and the output of Slovakia’s three automakers, Volkswagen Slovensko, Kia Slovensko, and PSA Peugeot Citroën Slovakia, jumped by 56.3 percent y-o-y while production of electrical appliances soared by 85.3 y-o-y. Production in the metallurgy sector, led by US Steel Košice, Slovalco and Železiarne Podbrezová, increased by 31 percent y-o-y. According to the analysis by UniCredit Bank, these three sectors accounted for over 50 percent of total production.

But analysts also noted that the so-called base effect is partially behind these high percentage increases. One year ago industrial production in Slovakia was at a very low level, meaning that improvements coming in 2010 yield extraordinarily high percentage increases.

New jobs are still missing

Despite better industrial output, employment levels continued to decrease in May and are 4 percent less than in May 2009. Experts say production has increased without corresponding job growth due to higher labour productivity, the Sme daily wrote. According to Dereník, labour productivity per employee in the industrial sector in Slovakia grew by as much as 40 percent compared to the previous year.

Optimistic views for Q2 2010

Martin Lenko, senior analyst with VÚB Banka, expects that there was continued high growth in industrial production in June, estimating that it will be reported at 25 percent year-on-year.

“Simultaneously, the faster growth in industrial production also boosts the probability of a higher than expected GDP growth in 2Q,” said Lenko, adding that his expectation is that GDP will have grown 3.2 percent in the second quarter compared with last year. The Statistics Office will reveal its flash estimate of GDP growth for the first half of 2010 on August 13.

Hagara is also optimistic about the figures for economic growth occurring in the second quarter of 2010.

“It is almost sure that the second quarter of 2010 will also record very nice growth in GDP,” he said. “A less positive feature is that weak figures in domestic retail sales in May, in contrast with the strong growth of industrial production, indicate that it is foreign demand which has been propelling Slovakia’s economy.”

For this reason Hagara thinks that economic growth could slow down during the second half of 2010.

“Government stimuli will fade away gradually from economies of the eurozone and foreign demand may slow down also as a consequence of inevitable budget cuts that some governments have already announced,” Hagara said, adding that at the same time he does not expect that domestic demand in Slovakia could grow enough to patch up a hole caused by decreasing foreign demand.

According to Dereník, belt tightening in Europe represents a risk for future growth in industrial production in Slovakia.

“For Slovakia it is of key importance to focus especially on our biggest trade partner, Germany, and not on southern parts of the European Union,” Dereník said.

Get daily Slovak news directly to your inbox

Top stories

News digest: Health care staff still lacking, president asks for amends

Slovakia is preparing to launch the nationwide testing on Saturday morning, but the government admitted they still need hundreds of health care staff. Kotleba violates quarantine and hospitals in the north are full.

The Bratislava Self-Governing Region started testing its staff on October 30.

Testing is impossible to carry out as planned, president says

President Zuzana Čaputová asked the government to reconsider measures for people who do not get tested, many will not get a chance.

President Zuzana Čaputová met with the representatives of the armed forces.

The big test is upon us. What are we to do?

For a foreigner living in Slovakia, there is yet another concern.

Health care professionals still lacking ahead of Saturday's testing

Government avoids mobilisation for now, PM offers an extra bonus to health care professionals who can serve the whole weekend.

Dolný Kubín