Afternoon analysis 21.11.2016:
The data from the Polish economy is disappointing. However, it doesn’t have a significant impact on the zloty, because the Polish currency is taking advantage of a better sentiment towards the emerging market currencies.
Polish data is disappointing
According to the Polish Central Statistical Office (GUS), industrial production index quoted a second decline this year (negative 1.3% vs September 2015) after two consecutive months of increasing. Last year, the Polish industry increased by 2.4% in October. The only growth was observed among companies that produce and provide with electric energy, gas, steam and hot water (positive 16.4% MoM). However, they still have quoted an 8.7% decline in YoY interpretation.
A Month over Month production decline has been quoted in twenty out of thirty-four industrial sectors. A decline in construction production appeared to be especially severe (negative 20.2% YoY vs expected negative 15.8% and negative 15.3% in the previous reading). In Year over Year interpretation, decline was at the level of 1.6%. On the other hand the highest increase was observed in production of cars and trailers (7%), as well as of fabrics (5.3%).
The GUS also published the retail sales data for October today (positive 3.7% YoY vs 4.1% YoY). Its result shows that depreciation trend continues since August (5.6% YoY, the highest since March 2014). In September, this index was at the level of 4.8% YoY. The largest decline was observed in sales of cars, motorcycles and auto-parts (negative 4%). On the other hand, the highest increase was observed in sales of pharmaceuticals, cosmetics and orthopedic equipment (10.3 YoY). Also, retail sales in non-specialized stores increased by 11.9% and sales of furniture and electronics increased by 10.2%.
Today’s data can be significantly negative for the GDP. It’s previous reading was significantly worse than the consensus, which has been decreased a few times (2.5% vs 2.9%). Lower consumption (an indirect result of retail sales), as well as decreasing industrial production may cause that the GDP will eventually be below 2%. However, estimates from the Ministry of Economy continue to indicate a 3.4% growth.
The Polish currency took advantage of an improving sentiment towards the emerging market currencies and slightly gained value. The GUS data didn’t cause changes on the zloty, which seems to be more determined by the global sentiment, rather than by the local data. The euro costs 4.43 PLN, the franc 4.13 PLN and the dollar 4.17 (0.04 PLN less in comparison to its recent fourteen-year records). The zloty lost relatively mich against the pound, which was globally stronger. The British currency costs 5.21 PLN and is only 0.50 PLN chaper than it was on the day before the Brexit referendum.
Tomorrow at 12.00 AM, the Confederation of British Industry (CBI) will publish the data regarding orders within the British industry for November. This is one of the leading indexes, which has been indicating conditions within industry. A reading above zero shows that the British companies expect an increase in orders. However, a reading blow zero shows that orders would decrease. Last month’s index was at the level of negative 17, which was the weakest this year. The market consensus assumes that the data for November will be at the level of negative 9. Historically, this index was more often negative. If the reading is slightly higher than expected, this would strengthen the pound. Today, value of the British currency was increasing, due to an improving global sentiment.
At 4.00 PM, the National Association of Realtors will present the data regarding sales of houses in the secondary market in the USA. This index appeared to be quite disappointing in July, as well as in August. In the latter month it went down to its lowest level since February. This situation changes in September. An increase in total sale was higher than expected (3.2%) and appeared to be the highest in six months. After this relatively large increase, the market consensus assumes a 0.5% depreciation in Month over Month interpretation. The MoM data is relatively volatile. However, annualized amount of sold houses has gradually increased since July 2010. We can’t expect this data to be significant for the dollar. The market moves have been recently determined by a sentiment, which has been observed since the election of the new American president.
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