Poland’s industrial production declined 2.7% year on year in constant prices in July (chart), after a revised fall of 1.1% y/y the preceding month, unadjusted data from the statistical office GUS showed on August 21.

The July reading came clearly below the consensus, which expected a fall of just 0.9% y/y, and has analysts worried about the sector’s growth perspective in the remainder of the year.

“The demand slump is leading to the undesirable accumulation of finished goods inventories … which could mean that the output will struggle to return to positive year-on-year dynamics in the coming months,” Santander Bank Polska said.

Overall, Poland’s economy is expected to post slight growth of around 1% in 2023 – but the industrial sector is unlikely to be an important driver, analysts say.

Seasonally adjusted, output contracted 2% y/y in July, following a decline of 0.8% y/y the preceding month, GUS data showed. 

In unadjusted monthly terms, industrial production fell 8.5% in July after growing a revised 1.5% m/m in June, GUS also said. The adjusted month-on-month reading came in at -1%, a changeover from a gain of 0.4% m/m in June. 

Broken down by the main segments and in unadjusted terms, output declined 2.4% y/y in July in manufacturing after falling a revised 0.3% y/y in June. 

Output in the utility sector declined 4.3% y/y in July after a revised fall of 8.9% y/y the preceding month. 

In water supply and waste management, production slid 1% y/y in July, which followed a revised decline of 1.4% y/y in June.

Production also decreased 10.2% y/y in mining and quarrying in July, after falling a revised 13% y/y in the sixth month, GUS data also showed.

Overall, production declined in 24 out of 34 industrial segments in July in y/y terms, up from 22 in June. 

Industrial production and other data published this week strengthen the outlook for an interest rate cut by the National Bank of Poland possibly as soon as September. Poland’s interest rates are at a 20-year high of 6.75%.