SK: Industrial Production Fell Below Expectations

The industry performed below expectations in June, with a 2.4% year-on-year decline. However, on a monthly basis, in seasonally adjusted terms, industrial production increased by 2.1%. Overall, in the first half of the year, industrial production decreased by 0.1%.

In June, negative year-on-year developments were observed in 10 out of 15 components of the index. This negative performance was driven by the manufacture of machinery and equipment (-20.5% y/y) and a decrease in the manufacture of metals (-9% y/y; contribution -1.69 p.p). After two months of growth, the manufacture of transport equipment decreased by 3.5% year-on-year (contribution -0.96 p.p.). On the other hand, electricity, gas, and steam supply increased by 52%.

Industrial production remains under pressure. Leading indicators suggest that the anticipated recovery within the Eurozone has lost momentum, potentially leading to further demand-side challenges in the coming months. The global economic recovery may be delayed until late autumn or even the end of the year. In addition to generally weaker demand, the key automotive sector is again experiencing supply chain issues, which could further complicate the situation. The Slovak industrial sector will continue to be supported by the third block of the Mochovce nuclear power plant in the coming months. The anticipated launch of the fourth block next year could further enhance the attractiveness and competitiveness of the Slovak economy, particularly in terms of energy supply for potential expansion of our industrial capacities. Further developments in Slovakia will be significantly influenced by the performance of the key German economy. A potential cooling of the U.S. market would pose an additional burden for Germany and, by extension, our industry.

We expect GDP growth to reach 2.2% year-on-year in 2024, with the impulse from foreign trade anticipated primarily towards the end of the year. A rebound of the Eurozone, especially Germany, will have a significant impact on the activity in the Slovak economy.