Poland's Purchasing Managers' Index (PMI) fell 1.9 points to 45.1 in June (chart), the worst reading since November, the economic intelligence company S&P Global said on July 3.

The indicator has now lingered below the 50-point mark separating contraction from growth for 14 consecutive months. The immediate outlook for Poland’s manufacturing sector remains bleak in line with forecasts of an economic slowdown that will curb GDP growth to around 1% in 2023, according to analysts.

There were “marked falls in output, new orders and purchasing accompanied by another round of job shedding,” S&P Global said.

“The declines in demand and production were the steepest seen in 2023 so far. Reflecting the weakness in new orders, a sharp fall in backlogs was recorded and output expectations remained subdued,” the index’s compiler added.

On the positive side, the rate of decline in input prices stayed closed to May's record, leading to a fresh record fall in output prices. That is in line with the most recent PPI data from Poland’s statistical office GUS, which indicated a major slowdown in the growth of factory gate prices to just 3.1% y/y in April.

Suppliers' delivery times shortened further, marking the first sustained improvement in vendor performance since early-2016, S&P Global also said.

Overall, Poland’s manufacturers “remained exposed to weak European markets, especially Germany,” Trevor Balchin, S&P Global’s economics director, said in a statement.

That had an effect on employment, as manufacturers once again trimmed headcounts in June, extending the current sequence of job shedding in the sector to 13 months. 

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

Manufacturers’ situation will stabilise in the remainder of 2023 before a rebound in 2024 in the wake of “easing of fiscal policy, first interest rate cuts by the National Bank of Poland, and a pick-up in housing construction, which would have positive spill-over effects in manufacturing,” Bank Millennium said in a comment. 

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 a contraction of 3.2% y/y in constant prices in May (chart), after a revised fall of 6% y/y the preceding month.

June industrial production as well as PPI data from GUS are due in the second half of June.