Tim Gosling in Prague -

Evidence continues to stack up suggesting that the Polish economy is starting to feel the full effects of the Eurozone crisis. July 18 saw another example, as the statistics office reported June's industrial production growth at just 1.2% year on year.

Whilst some Central European peers might have been glad to report such a figure - the Czech Republic saw its output drop 2.4% the same month - for Poland and the market, the number was a shock. Consensus had been for an expansion of 4.1%.

Such a severe shortfall only extends concern over Poland, which until very recently has been perhaps the outstanding economy in the EU as it has sailed through the crisis that began in 2008. GDP growth of 3.5% in the first quarter of the year was generally seen as a sign of a worrying slowdown - despite the fact that most global economies would have killed for such a result. Data throughout the second quarter of the year has been far less encouraging however.

The National Bank of Poland is in a similar position to everyone else, and has watched with increasing worry as the economy puts on the brakes. It stirred up a bit of a storm in Warsaw when it became the only central bank in the EU to raise rates this year. The economy minister accused it of "stabbing the economy in the back," but the NBP held its ground, keeping its eye firmly on sticky inflation and the vulnerable zloty.

However, even Governor Marek Belka admitted last week that economic growth is now becoming a huge worry, and he strongly hinted a cut could now be on the way. The industrial production shortfall only makes that more likely. Indeed, the discussion since the results - Poland also reported on July 18 that after a slight increase in May, PPI returned to 4.4% year on year in June - has concentrated on "when", not "if" a rate cut is coming.

"Both figures clearly indicate that further tightening of monetary policy is highly unlikely," analysts at Erste start off in a note, before turning to the timing of a cut. "Such expectations are supported by [Monetary Policy Council] members' reactions. Chojna-Duch said that a rate cut should be considered already in September, but we do not think that it is realistic to expect the majority of the MPC to agree on a first cut so soon. Another dovish comment came from Zielinska-Glebocka, who said that the data is a very bad sign and that the slowdown may be worse than expected. The weak data supports a change in monetary policy bias (to easing) and thus are bond supportive."