New industrial orders rose by 9.6% y/y in March with the growth slightly easing from 10.8% y/y increase reported in February, the statistical office data published on Thursday showed. Despite the moderation, the new industrial orders growth remains quite robust and indicates that the strong expansion of the industrial output is to be preserved going forward. The developments in new industrial orders since August 2018 are definitely related to the British car maker Jaguar Land Rover that launched the operations of its new EUR1.4bn car plant in Nitra in early-October 2018, in our view. After seasonal adjustment, orders however stagnated m/m after falling by 2.7% m/m in February.
New industrial orders in the automotive sector, which accounted for 58.4% of the total in March (up from 58.0% in February, 56.2% in January, 55.8% in December), expanded by the robust 17.3% y/y in the month with the pace easing from 21.4% y/y in February and 48.2% y/y in January. As mentioned above, the sector had by far the biggest contribution to the annual increase in the total new industrial orders, which in our view reflects the investments of the incumbent three carmakers into output expansion, the investment of the Jaguar in new production capacity as well as the still strong demand for the sector’s produce. Given the quite strong expansion of new orders in the automotive sector, we may expect its output to continue to perform strongly in the coming months as well. Some of the other more important subsectors — fabricated metal products, electrical equipment also supported the growth of the headline print in March as the pace of new industrial orders there continued to expand in the month. At the same time, the reported contraction in new industrial orders for basic metals, ICT, machines and equipment, prevented faster increase of the headline print in March.
Given industrial new orders developments in the first three months of the year, we maintain that the industrial sector, especially the automotive branch, will remain a major economic growth driver this year. The car sector is to be supported by the new production capacities and the gradual launch of fourth car maker’s production in the country, while the three older car makers are unlikely to contribute to the sector’s further expansion for the time being. However, given the fact that the number of processing industry sectors seeing annual output growth in the recent months declined – in January there were only eight sectors (out of thirteen) and the industrial growth was driven solely by automobile industry, they were only five in February and four in March, coupled with the declining confidence in industry might be indicating that the current, relatively dynamic, industrial growth is likely nearing its end, in our view.