Poland's Purchasing Managers' Index (PMI) grew 1 point to 48.5 in February (chart), the highest reading since May 2022, the economic intelligence company S&P Global said on March 1.

The indicator remains below the 50-point mark separating contraction from growth, where it has stayed for 10 consecutive months now. Despite the relative improvement suggested by the PMI – which does not necessarily translate into real data – the outlook for Poland’s manufacturing sector remains bleak.

"It will be difficult to achieve a significant improvement in the economic situation in the industry, at least in the coming months. The fall in the German manufacturing PMI in February … high inflation in Poland and abroad, and the consolidation of the impact of high interest rates should keep demand at a low level,” Bank Millennium said in a comment. 

The upward movement in the PMI was principally reflective of weaker declines in both production and new orders, according to S&P Global. 

“That said, and despite the relative improvements, underlying market demand remained soft due to the ongoing war in Ukraine and still high inflation undermining sales,” the index’s compiler said.

Weak output and new orders affected companies’ purchasing activity and their employment plans. 

Purchasing activity was lowered markedly as firms continued to pursue destocking policies.

“Staffing reductions largely reflected the non-replacement of leavers, whilst buying was reduced in response to lower output requirements,” S&P Global said. 

Reduced buying activity amongst firms helped to further alleviate pressure on suppliers. The result was a marginal improvement in vendor delivery performance for the first time in over three years amid reports of a better balance between demand and supply capabilities. 

This partly explained a noticeable reduction in input price inflation, which came in at the lowest in over two years. Output prices also decreased, as reduced cost pressures and weaker market demand weighed on company pricing power.

The most recent actual data from Poland’s industrial sector disappointed, with an expansion of 2.6% y/y in January, 1.4pp below the consensus line. 

PPI inflation came in at 18.5% y/y in January, easing 2pp versus the annual reading from the preceding month. 

February industrial production and PPI data from GUS are due later this month.