Industrial output increased by 12.0% y/y in July and rebounded after the 1.4% y/y contraction in the previous month, the statistical office (KSH) released detailed figures for the sector. The print was unchanged from the preliminary release earlier this month. Calendar-adjusted industrial output growth strengthened in July and was the highest since Mar 2017. We think that the improvement in the industry was partly due to low base effects, possibly related to different timing of the usual summer shutdowns in the car industry. We accordingly believe that the strong growth might be one-off and expect that the sector performance will moderate in the next months. The eurozone slowdown and the global problems of the automotive industry will be constraining factors but the local industry is still likely to remain resilient to some extent, judging by the favorable PMI readings, in our view. In seasonally- and calendar-adjusted terms, industrial output rose by 1.7% m/m in July.
The strength of the industry in July came on the back of both external and domestic demand. In calendar-adjusted terms, external sales of the industry rose by 9.3% y/y, the strongest growth since late 2015. Domestic sales were up by 12.3% y/y, also an outstanding growth in view of the track record from the past few years.
The strength of domestic and external sales was partly related to the automotive industry. Output of the transport equipment sector accordingly rose sharply by 34.6% y/y in July and the KSH confirmed that it reflected different timing of the summer stoppages in the sector. Motor vehicle output rose by 60% y/y and car components production – by 15.8% y/y, the KSH said. Apart from the transport equipment industry, almost all other manufacturing branches reported improving performance during the month, which we partly attribute to the calendar effects in play.
The detailed data therefore strengthens our assessment that the industry is likely to slow down in the next months. Total new orders for the industry improved to 11.0% y/y growth in July, which we think reflects both the favorable calendar effects and the car industry stoppages base effect. On the other hand, the total order book of the industry was only 0.5% y/y higher at end-July, in our opinion evidencing the much weaker overall outlook for the short term.