Poland’s industrial production fell 6% year on year at constant prices in March (chart), after a gain of 3.3% y/y the preceding month, unadjusted data from the statistical office GUS showed on April 22.

The reading fell well short of the consensus, which expected a milder contraction of 2.2% y/y. Analysts say that the sharp fall occurred because March had two working days fewer this year and the typically less active Easter period. A much lower production in coal segment – which fell nearly 26% y/y – also contributed to the poor headline result.

That has analysts convinced that the contraction was likely a one-off and a rebound is on the cards possibly as soon as April.

“The weakness in production may be related to an exceptionally strong negative impact of calendar effects rather than a sudden deterioration in business conditions. Our view [is] that the Polish economy is in a rebound phase and industrial production should achieve positive dynamics on average this year, albeit rather modest,” Santander Bank Polska said.

Seasonally adjusted, output fell 3.9% y/y in March, following an expansion of 1.1% y/y the preceding month, GUS data showed. 

In unadjusted monthly terms, industrial production added 3.6% in March after a gain of 0.7% m/m in February, GUS also said. Seasonally adjusted, output fell 5.5% m/m after a fall of 0.1% m/m the preceding month. 

Broken down by the main segments and in unadjusted terms, output retreated 6.3% y/y in March in manufacturing after an expansion of 3.8% y/y in February. 

Output in the utility sector inched up 0.1% y/y in March after a revised fall of 4.2% y/y the preceding month. 

In water supply and waste management, production eased growth to 6.2% y/y in March, which followed a revised gain of 9.8% y/y in February.

Production crashed 13.1% y/y in mining and quarrying in March, after retreating a revised 2.3% y/y in the second month, GUS data also showed.

Overall, production expanded in just eight out of 34 industrial segments in March in y/y terms, compared to 24 in February.

Despite disappointing data - also from the retail sector - for March, analysts remain confident of an economic recovery in Poland in 2024. Analysts’ current consensus is for the GDP growth to come in at 3%-4% in 2024 after just 0.2% in 2023.

Industrial production and other March data also point to the National Bank of Poland (NBP) prolonging the pause in monetary easing.

"The data for March do not invalidate the main conclusions from the [NBP’s] March inflation projection, including forecasts of rapid wage growth. This will likely be reflected in higher-than-target inflation in service prices, so the prospect of interest rate cuts in Poland remains distant,” Bank Millennium said.

The NBP cut its reference interest rate by a combined 100bp to 5.75% in September and October.