Disinflation drives slight easing of manufacturing downturn in Poland, PMI shows

Disinflation drives slight easing of manufacturing downturn in Poland, PMI shows
/ bne IntelliNews
By bne IntelliNews June 2, 2023

Poland's Purchasing Managers' Index (PMI) gained 0.4 points to 47 in May (chart), beating expectations, the economic intelligence company S&P Global said on June 1.

The indicator continues to linger below the 50-point mark separating contraction from growth, where it has stayed for 13 consecutive months to date. The immediate outlook for Poland’s manufacturing sector remains bleak in line with forecasts of an economic slowdown that will curb GDP growth to no more than 1% in 2023, according to analysts.

Manufacturers reported a record drop in price pressures in May, in line with the most recent PPI data from Poland’s statistical office GUS, which indicated a fall in factory gate prices from over 20% year on year in January to just 6.8% y/y in April.

“Input prices and output prices fell for the second month running, with both seeing survey-record declines. Anecdotal evidence linked lower costs to raw materials including metals, chemicals and plastics, and the stronger zloty-euro exchange rate,” S&P Global said.

Despite easing of price pressures, the overall picture of Poland’s manufacturing sector shows a sustained downturn in demand and output linked to excess stocks and tight funds at clients. 

“Exports were again slow as weak European demand was compounded by the zloty's strength against the euro,” Paul Smith, economics director at S&P Global Market Intelligence said in a statement.

Against the backdrop of falling sales and output – the latter also affected by clearing backlogs – manufacturers’ confidence remained predictably subdued, with more cuts in staff – for the twelfth consecutive month in May – and reduced purchasing, S&P Global also said. 

The PMI’s May reading does not change much in the overall outlook for the sector, analysts say.

“The manufacturing industry continues to be significantly affected by the decline in demand resulting from high interest rates and households redirecting their spending from goods to services,” Bank Millennium said in a comment. 

“That said, the results of the May PMI survey show that companies maintain moderate optimism about the sector's condition after inflation subsides,” it added.

The most recent real data from Poland’s industrial sector – covering manufacturing, energy production, mining and quarrying, as well as water and waste management – showed it deep in a recession mode.

Output deepened decline to 6.4% y/y in April after falling 3% y/y the preceding month. May industrial production as well as PPI data from GUS are due in the second half of June.