New industrial orders decreased by 2.0% y/y in March with the fall deepening from 0.6% y/y in February, the statistical office data released on Wednesday showed. In nominal terms, new industrial orders amounted to EUR 4.5bn. New industrial orders declined by 1.9% y/y in January-March.
Detailed data showed that new industrial orders in the automotive sector, which accounted for 54.9% of total, went up by 3.2% y/y in March, slightly decelerating from 4.3% y/y growth reported in February. The positive growth in the car sector has prevented a stronger fall of headline print in March. Previously released industrial output data showed a 2.2% y/y decrease in the production of transport equipment in March. Given the positive growth of new orders in the auto sector, we may expect the output decline to ease or even to be reversed in coming months. We believe that over the longer term, the automotive sector, both its output and orders, is set to rise substantially, both because of investments of incumbent three car makers and because of the entry of Jaguar Land Rover, which is building a car plant in Nitra. And yet, the economy, especially the automotive sector, suffers from shortages of qualified labor, which limits the production capacities and is becoming a major hindrance for stronger expansion. Still, it likewise presses the manufacturers to focus more on innovations, new technologies and robotization to substitute the scarce labor, thus supporting their competitiveness in the long run. One of the ways the authorities are addressing the labor shortage problem is through simplifying the conditions for employing people from non-EU (third countries), although the regime will apply only to certain professions and districts.
Besides in car manufacturing, March new orders were higher y/y in only one other sector — machinery and equipment, which increased by 0.9% y/y with the expansion however halving that reported the previous month. The above development overall indicates that industrial output performance might be somewhat weak in the next couple of months, but we believe that such a development would be only temporary and that the sector, especially the automotive one, will be the main driver of the economic expansion. The biggest contribution to the decrease in total new orders came from electronics manufacturing that contracted 29.1% y/y. The second biggest contribution came from other transport equipment, where new orders plunged by 44.8% y/y in the third month of this year.