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Industrial production up y-o-y in June, growth decelerated, analysts say

Slovakia’s industrial output increased by 2.2 percent year-on-year in June 2016, according to the Slovak Statistics Office (ŠÚ).

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

This development was influenced by growth in manufacturing of 2.5 percent and by declines in mining and quarrying of 4.1 percent and in electricity, gas, steam and air-conditioning supplies of 0.1 percent.

Total industrial production was affected by y-o-y growth in the following sectors: in the manufacture of transport vehicles – 9.1 percent; in the production of metals and metal structures excluding machinery and equipment – 13.5 percent; in the production of electrical appliances – 11.2 percent; in the production of wooden and paper products and printing – 2.6 percent; and in the production of chemicals and chemical products – 6.6 percent.

Seasonally adjusted industrial output went down by 0.1 percent month-on-month in June.

In the first six months of 2016, industrial output increased by 3.7 percent y-o-y, with an increase in manufacturing of 4.4 percent; and decreases in electricity, gas, steam and air conditioning supplies of 1 percent and in mining and quarrying of 7.1 percent.

Analysts see industrial growth decelerating

However, month-on-month, Slovakia’s industrial growth decelerated in June, UniCredit Bank Czech Republic and Slovakia analyst Ľubomír Koršňák stated on August 10.

“In contrast to May, when industry was pushed down mainly by lower energy output, it was the key processing industries that posted a drop in June,” he said, as quoted by the TASR newswire. “At the same time, our earlier estimates were confirmed, with the energy slump emerging only as a short-term issue. The sector managed to return to its usual levels in June, posting a negligible year-on-year decline of 0.1 percent.”

He added that Slovak industry’s growth should continue to be driven mainly by a relatively stable revival of European economies, supported by cheap oil and loose monetary policies. The mood in Slovak industry remains predominantly positive, according to him, and largely unaffected by the result of the Brexit referendum – like other continental European economies. The summer months – involving regular holiday shut-downs – brought certain volatility into statistics, so surprising figures cannot be ruled out this year, either. On average, however, Slovakia’s industry should keep its growth trend also during the summer holiday months and at the end of this year.

Slovenská Sporiteľňa bank analyst Katarina Muchová noted that the June deceleration was mainly due to a 16.2-percent y-o-y slump in production of rubber, plastic and other non-metallic mineral products. Nonetheless, this sector does not have a big share on the overall index, and thus the overall industrial deceleration wasn't so pronounced.

Car production remained the chief workhorse with an annual surge of 9.1 percent.

“The sentiment in Slovakia’s industrial sector remains relatively unstable, even though there was some improvement in July compared to June,” Muchová added for TASR. “The risks included concerns of a possible deceleration of the Chinese economy and its effect on the global economic environment, as well as a rather cautious revival of economic growth in the eurozone. The referendum on Britain’s exit from the EU joined the risks in late June, creating uncertainty in Europe, but the Brexit effect seems to be rather limited at the moment. Although the deceleration in June was rather unsettling, we don’t expect it to last. Industrial production this year overall should continue growing at a relatively good pace.”

Topic: Economics


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