Industrial production grew strongly in November

The automotive industry propelled industrial production once again.

The automotive industry is the driving force of industrial production in Slovakia.The automotive industry is the driving force of industrial production in Slovakia. (Source: Sme)

Slovakia’s industrial sector positively surprised with strong growth in November. The industrial production index (IPI) increased by 11.9 percent year-on-year in November 2015, up from October’s 4.1 percent, the Slovak Statistics Office announced on January 11. The sector has thus repeated its record from July 2015, Boris Fojtík, analyst of Tatra banka, recalled.

Analysts see the automotive industry as behind the growth.

“Also in November the car production was the main driving force of the industry,” Ľubomír Koršňák, analyst with UniCredit Bank Czech Republic and Slovakia, wrote in his memo, specifying that the car production rose 27.5 percent y/y and accounted for almost two thirds of the year on year growth of the whole industrial sector. “Thus it seems that the VW scandal, at least for now, has not had a fundamental negative influence on Slovakia’s automotive industry.”

Koršňák believes that even when the scandal would have an impact, other carmakers in Slovakia would more than compensate for it thanks to strong demand in Europe.

Fojtík added that the information that Slovakia manufactured, for the first time in history, more than 1 million cars in 2015, only confirms the steep growth of this sector.

“Industrial sectors like production of machinery and cars benefit especially from the boom now going on in Europe,” said Fojtík. “The main stimuli are the cheap crude oil and the monetary policy of the European Central Bank, whose result is a weak euro.”

The sector of manufacturing machinery and equipment reported a sound increase too, up 21.6 percent while the pharmaceutical industry grew 20 percent y/y, Koršňák pointed out. Fojtík added that cheap crude oil in general helps sectors like the pharmaceutical industry and rubber, chemical and oil industry.

“It seems that this rule is true in Slovakia because these sectors have registered, except for the oil industry, two-digit growth,” Fojtík wrote in his memo.

For now production of metals remains in the black, but Fojtík recalled that this sector has been reporting problems with sales due to competition from China for some weeks.

“One can expect that we will see drops in production in this sector during months to come,” Fojtík wrote.

Koršňák expects that the industrial production will continue to grow but warned that a significant worsening of the economic sentiment indicator at the end of 2015 might indicate a slowdown in industrial production. Also Fojtík indicated that a low growth rate in the industrial sector in December would be of no big surprise.

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