Industrial output slips: newest GUS figures support further interest rate cut

Industrial output in February shrank a further 2.7% after already falling 8.9% month-on-month in January, according to the Central Statistical Office's (GUS) latest data published on Friday. The February drop, which was 0.1% lower than in the same month a year earlier, caught most analysts off guard, who had expected to see slight output growth in the period. GUS also said domestic producer prices rose 0.1% month-on-month in February, bringing year-on-year producer price inflation down to 4.2% from 4.7% in January. Analysts say the new figures reveal that economic growth is indeed slowing down, while domestic demand already lies at a worryingly low level. After the Monetary Policy Council (RPP) trimmed key interest rates by 100 basis points (1%), demands to make deeper cuts are becoming increasingly louder. Interest rates are expected to be lowered by at least 300 basis points this year. "...after today's data and taking into account the recently strong zloty, maybe the rate council should wait a month or so and then cut more sharply. This scenario seems now more likely," said Monika Kubik-Kwiatkowska, a senior analyst at Standard & Poor's MMS in Frankfurt. (Reuters)