Polish July Industrial Output Increases 10.4% on Year in July

This in Bloomberg today:

Polish July Industrial Output Increases 10.4% on Year (Update1)

By Dorota Bartyzel and Katya Andrusz

Aug. 20 (Bloomberg) -- Polish industrial output rose at a faster annual pace in July than corporate wages, easing concern that an increase in borrowing costs will be necessary to prevent labor expenses from outpacing productivity.

Industrial output rose 10.4 percent on the year and declined 2 percent from June, the Warsaw-based Central Statistical Office said today. The annual rate exceeded the 10.1 percent median estimate of 17 economists surveyed by Bloomberg. The monthly rate was as predicted in the same survey.

The annual pace of growth almost doubled from last month and for the first time in three months outpaced wage growth. This may indicate that manufacturers will finance higher labor costs with revenue from growing production instead of boosting prices, which could spur inflation and force the central bank to raise interest rates.

``An interest-rate increase in August is less possible, mainly because of a better relation between productivity and wage growth,'' said Jaroslaw Janecki, an economist at Societe Generale in Warsaw.

The central bank-led Monetary Policy Council, which sets interest rates for the country will meet on Aug. 28-29.

The council has raised the benchmark seven-day reference rate by a quarter of a percentage point twice this year, to 4.5 percent, to combat inflation, which reached the bank's mid-range target of 2.5 percent in May for the first time in two years.

In a separate report, the office said July producer prices grew 0.4 percent on the month and increased 1.5 percent on the year.

The zloty traded at 3.837 per euro at 2:45 p.m. in Warsaw, unchanged on the report and down from 3.82 on Friday. The yield on the five-year government bond rose 3 basis points in the morning from Friday and remained at the same level after the statistics reports.