Poland’s industrial production declined 3.9% year on year in constant prices in December (chart), after a revised increase of 0.3% y/y the preceding month, unadjusted data from the statistical office GUS showed on January 22.

Despite falling clearly, Poland’s industrial output still turned out better than the consensus, which expected a fall of 5.2% y/y. The actual fall came on the back of the calendar effect in the first place, but also in the wake of a manufacturing slowdown persisting in the Eurozone, including Poland’s key trade partner Germany, analysts say.

“Export-oriented industries experienced a decline in production in the fourth consecutive month in December. Consequently, there has been a lower demand for intermediate goods produced in Poland,” Credit Agricole said in a comment.

The extent of the recovery in the industrial sector – which is projected by most analysts in line with the general outlook for a pick-up in activity across the entire economy – may be limited throughout 2024 by the factors at play in December.

“Forward-looking survey indicators suggest that the industrial sector is likely to broadly stagnate at the start of this year, and we think that soft external demand will limit the pace of the recovery for much of 2024,” Capital Economics said.

Seasonally adjusted, output contracted 0.5% y/y in December, following a decline of 3.3% y/y the preceding month, GUS data showed. 

In unadjusted monthly terms, industrial production fell 9.8% in December after adding a revised 0.6% month on month in November, GUS also said. The seasonally adjusted m/m reading came in at a positive 2.9%, after a fall of 0.3% m/m in November. 

Broken down by the main segments and in unadjusted terms, output declined 5.6% y/y in December in manufacturing after a revised fall of 1.5% y/y in November. 

Output in the utility sector expanded 11.4% y/y in December after a revised gain of 11.2% y/y the preceding month. 

In water supply and waste management, production grew 1.6% y/y in December, which followed a gain of 4.7% y/y in November.

Production slid 3.5% y/y in mining and quarrying in December, after growing a revised 1.8% y/y in the eleventh month, GUS data also showed.

Overall, production expanded in just 11 out of 34 industrial segments in December in y/y terms, compared to 17 in November.

Industrial production and other data published at the end of 2023 point to the National Bank of Poland (NBP) prolonging the pause in monetary easing. The NBP cut its reference interest rate by a combined 100bp to 5.75% in November and December.

“The data do not change our assessment of the prospects for monetary policy. MPC members clearly communicate their willingness to stabilise interest rates in the coming months," Bank Millennium said. 

The December reading of industrial production also does not change much in the overall GDP growth outlook for Poland in 2024.

“With fiscal policy set to remain relatively loose this year, inflation at a much lower level and monetary conditions having eased in recent months, we think that the recovery has further to run as domestic demand strengthens. We expect GDP growth to pick up to 3% this year, which is slightly above consensus,” Capital Economics said.