Poland’s manufacturers tick up in October but still in negative territory

Poland’s manufacturers tick up in October but still in negative territory
/ bne IntelliNews
By Wojciech Kosc in Warsaw November 3, 2023

Poland's Purchasing Managers' Index (PMI) grew 0.6 points to 44.5 in October (chart), the economic intelligence company S&P Global said on November 2.

Despite climbing to the highest level in four months – and improving in successive months for the first time since the beginning of the year – the indicator has now lingered below the 50-point mark separating contraction from growth for 18 consecutive months. The ongoing slump is the third longest in the history of the survey, with only the 2000-2002 and the pandemic-marred 2018-2020 series running longer.

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.

“The overall downturn eased for the second month running, mainly reflecting softer declines in new orders and employment,” according to S&P Global.

“These contrasted with faster reductions in output, backlogs and purchasing as firms aimed to scale back operations and deplete inventories. The latest data signalled a further improvement in supply chains and lower input prices, which fed through to another cut in manufacturing output prices as firms competed for a shrinking pool of business,” the index’s compiler added.

The PMI pricing section is in line with the most recent PPI data from Poland’s statistical office GUS, which indicated an ongoing deflation in factory gate prices at -2.8% y/y in September.

The PMI’s October reading might point to a looming end of the downturn in the sector, analysts say.

“The economic downturn in industry continues, although its scale is weakening,” PKO BP said in a comment.

“Today’s data indicate a positive start to the fourth quarter, which, in our opinion, will bring a recovery in industrial activity. Weak economic conditions among our main trading partners, particularly the recession in Germany, do not favour export orders. However, the decline in inflation and the still high wage growth support domestic demand,” Bank Millennium said.

The recovery may still be months away. 

The most recent actual data from Poland’s industrial sector – covering manufacturing, energy production, mining and quarrying, as well as water and waste management – saw output deepen its decline to 3.1% y/y in constant prices in September, after a revised fall of 2.9% y/y the preceding month.

October industrial production and PPI data from GUS are due in the second half of October.