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Industrial production up in most sectors according to analysts

The volatile refinery industry, the production of chemicals and consumer electronics were the only sectors to report an output drop from April to May after a seasonal adjustment.

Illustrative stock photo(Source: TASR)

Otherwise, production grew in most industrial sectors in Slovakia during May 2017, the TASR newswire wrote, quoting industrial output figures released by the Slovak Statistics Office on July 12.

“Meanwhile, metals and metal producers, and food producers showed dynamic growth,” UniCredit Bank Czech Republic and Slovakia analyst Ľubomír Koršňák said. “Output in the key Slovak sector – the automotive industry – rose as well, however, not enough for the sector to show a year-on-year growth. Compared to last May, the automotive sector's industry was slightly (0.6 percent) lower.”

Nevertheless, Koršňák is pleased that the industry managed to maintain an upward trend despite the weaker output of its two former driving forces (cars and electronics). “It was thanks to other export-oriented industries, with metals and metal producers at the top (17.4 percent), then producers of electronic devices (11.7 percent), as well as food producers (19.1 percent),” he noted, according to TASR. “Slovak industry currently seems to be benefiting from a growing demand for investment goods and semifinished foods rather than from reviving consumer demand in Europe.”

The mood in European industry, as well as consumer confidence in Europe remains relatively strong, which should be positively reflected in the condition of Slovak industry as well, Koršňák said: “We estimate y-o-y growth of industrial production in a range between 4 and 5 percent for most of the second half of the year. However, we expect a short-term deceleration of Slovak industry in June as a consequence of the one-week strike at Volkswagen Slovakia. This might slow down industrial growth by 3-4 percentage points. Therefore, we cannot rule out that Slovak industry might post a slight y-o-y drop in output in June. Nevertheless, we expect it to preserve a moderate y-o-y growth of about 1 percent,” the UniCredit Bank analyst summed up.

Metallurgy strong, Easter impacted statistics

The growth of industrial output in May was chiefly driven by the production and processing of metals, going up 17.4 percent y-o-y, according to Slovenská Sporiteľňa analyst Katarína Muchová.

“The April decline proved to be temporary, influenced by a different number of working days and the timing of Easter this year,” she added. “We expect Slovak industry to keep growing at a solid pace in the upcoming months, though the summer months will bring certain fluctuations due to carmakers' scheduled summer operational breaks. The impact of the June strike in Volkswagen might be visible on industrial output data for June, however, it should not be that significant,” she added.

Automotive industry losing momentum

After the fluctuating results of industrial production caused mainly by the Easter holidays – and the ensuing differences in the number of workdays – the growth of the industrial production index got back to a normal level, Tatrabanka analyst Boris Fojtík wrote, adding that the May increase in industrial production exceeded even market expectations. The May result was very close to the average for the first five months, Fojtík also informed.

“So far, this year, the main powerhouse of the industry is metallurgy, and May follows this trend – this branch grew by 17.4 percent year-on-year,” according to Fojtík. Thanks to the slow-down of the automotive industry, metallurgy became the leader, the Tatrabanka analyst stated, adding that it seems that car manufacturing will not regain its position as leader this year, as it has been in the red for three months out of five so far – not taking into consideration the statistics for the June strike which may bring double-digit minus figures for the automotive branch for the month of May. Overall, Slovak industry is expected to follow the path of slow growth, but the volatility of results for the vacation months will be increased by the summer holidays, Fojtík summed up.

The Statistics Office reported earlier on July 12 that industrial production recorded a year-on-year growth in May 2017 of 5.1 percent. After seasonal adjustment, industrial production in May 2017 grew month-on-month by 3.8 percent.

Topic: Economics


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