Polish manufacturers remain downbeat in March but outlook improves

Polish manufacturers remain downbeat in March but outlook improves
/ bne IntelliNews
By Wojciech Kosc in Warsaw April 3, 2023

Poland's Purchasing Managers' Index (PMI) slid 0.2 points to 48.3 in March (chart), the highest reading since May 2022, the economic intelligence company S&P Global said on April 3.

The indicator remains below the 50-point mark separating contraction from growth, where it has stayed for 11 consecutive months now. The immediate outlook for Poland’s manufacturing sector remains bleak in line with forecasts of a deep economic slowdown that will curb GDP growth to no more than 1% in 2023.

“Hopes of the Polish manufacturing sector returning to stabilisation were dashed during March as both output and new orders declined at faster rates and ended the recently improved trends in these variables,” Paul Smith, economics director at S&P Global Market Intelligence said in a statement.

Against the backdrop of falling sales and output, manufacturers remained cautious in their purchasing and hiring decisions, S&P Global said. 

Latest data showed that buying was again reduced, extending the current period of contraction to 10 months. Companies also chose not to replace leavers in their workforces, the net impact being another fall in employment, extending a trend that began in June last year.

Still, backlogs of work fell in March for the tenth month in a row, and to the steepest degree since last November. There also were some reports of higher productivity at plants.

The March PMI survey also showed that with input prices rising at a slower pace, and market demand reported to be fragile, output charges rose modestly and to the lowest extent for two-and-a-half years.

Analysts say that the coming months will be marked by “weak domestic demand” amid a slowdown in global manufacturing.

That said, manufacturers' outlook beyond the immediate future seemed to have improved in March on the back of hopes for stabilisation of the business environment and weakening inflation.

“Price stabilisation and mitigation of supply problems may limit the scale of the downturn. The weakening of price trends also gives hope for a more solid consumer disinflation in the coming months,” PKO BP said in a comment. 

“Restructuring processes launched in many companies, aimed at increasing efficiency and reduction of energy consumption, as well as the mild nature of the slowdown in economic growth in Poland, encourage companies to formulate more optimistic assessments of their future activity,” Credit Agricole said in a comment.

The most recent real data from Poland’s industrial sector showed it in a depression mode, as output contracted 1.2% y/y in February after an expansion of 1.8% y/y the preceding month. PPI inflation came in at 18.4% y/y in February, easing 1.7pp versus the annual reading from the preceding month. 

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