Industrial sales moderated their growth to 7.6% y/y in May from 9.9% y/y in April (revised from 9.7% y/y), according to the INSSE. The slowdown was mainly backed by a notable worse performance in mining, but manufacturing sales also performed weaker than in April. Sales in mining were severely affected by lower increases in oil, gas and metals, with negative effects on production developments. Only coal sales jumped significantly, by 68.8%, very probably to coal-fueled electricity generators.
As for manufacturing, sales remained in the positive territory with their annual growth in most sub-segments, but with a major slowdown. In addition, beverages, apparel and shoes, which mostly sell locally, recorded sales decreases in May, in line with domestic demand deterioration. Industrial exporters in tobacco, electronic components, computers and other-than-road-transport vehicles kept on reporting double-digit sale rises, which probably sustained exports’ pick-up in May.
New manufacturing orders moderated growth more significantly, being largely affected by a major slowdown in new orders for transport vehicles. Nevertheless, coming after the spike in April, when local shipyards probably benefited from some large orders, new manufacturing orders remained with a modest increase, not the worst in 2019. Growth was most probably mainly sustained by external orders, as domestic demand seems to have suffered from some worsening in construction, in our opinion. Apart from than, new orders decreased in apparel and metallurgy in May.
Thus, industrial sales and new orders deteriorated in May, pushing industrial players to weaken production. The major negative influence seems to have come from the domestic market, where demand is narrowing. External demand is not in a very good shape either, but managed to keep sales some manufacturing fields on growth, as external orders reported a strong improvement in April. It looks like demand from domestic construction deteriorated in May, dragging back industrial demand to a bleak area. Pessimism among industrial players intensified so we think that deterioration would continue in the following periods. Besides, output figures already indicated that producers don’t have high hopes in a recovery in the short run.