Poland's Purchasing Managers' Index (PMI) declined 1.6 points to 54.5 in January, the economic research company IHS Markit said on February 1.

The January reading was the 19th straight putting the index above the 50-point line separating contraction from growth. While the degree of expansion in the industrial sector remained solid, higher prices and supply-side constraints hindered activity.

“Output and new orders both rose, but higher prices and supply-side constraints served to weigh on rates of expansion: average lead times again lengthened sharply, whilst both costs and charges increased to sharper degrees,” IHS Markit said.

“Worries over the persistence of inflation and difficulties in procuring inputs meant optimism about the future slipped to its lowest since November 2020. Firms nonetheless took on extra staff at a sharper rate in response to a further rise in backlogs of work,” the index’s compiler added.

Persisting supply-side challenges encouraged firms to bolster their inventories of purchases. A tenth successive monthly rise in input purchases was recorded, as manufacturers continued to buy and stockpile goods wherever they could, IHS Markit noted.

Trends outlined in the PMI survey will be reflected in the January readings based on real data from the industrial sector. PPI is expected to grow at an elevated pace after surging 14.2% y/y in December, compared to 13.2% y/y the preceding month.

The PPI has been accelerating since January, fuelling headline inflation. Polish CPI grew 8.6% y/y in December, adding 0.8pp to November’s reading.

Poland’s industrial production expanded 16.7% y/y at constant prices in November, after growing 15.2% y/y the preceding month.

Both the PMI and industrial production readings suggest Poland’s economy is in for a strong start to 2022 after a very good fourth quarter data. The carry-over effect will only fade around midway through the year, analysts expect.

Poland’s GDP expanded 5.7% in 2021. Growth in 2022 will likely slow down to around 5% on the back of the adverse effects of inflation and increased costs of living on Poles’ consumption habits.