The Polish industrial production fell by 3.1% YoY in September with a further deepening of the decline in manufacturing (-3.7% YoY). There are, however, some encouraging signs as seasonally adjusted data points to a 0.9%MoM increase in output. Hope dies last.
Large annual declines in production were recorded in export-oriented industries: metals (-15.7% YoY), electrical equipment (-15.0% YoY), and electronic and optical products (-10.4% YoY). At the same time, increases were recorded in areas related to investment and energy. Production in the “repair and installation of machinery and equipment” increased by 7.3% YoY. Growth was also observed in the “electricity, gas, steam, and air conditioning supply” (+3.7% YoY).
According to ING, the seasonally adjusted data suggests that the industry has most likely found the bottom and has started to rebound. Business surveys suggest that the decline in orders is slowing down, which should support a gradual stabilization and then a bounce back in activity in the coming months. Producer prices (PPI) fell by 2.8% YoY in September, following a 2.9% YoY decline in August.
For months, the situation has been weakest in manufacturing. Furniture manufacturing stands out in particular, which probably felt a strong deceleration in the housing market after rate hikes from both the Polish central bank and the ECB. However, the rebound in demand for mortgages due to government support gives hope for an improvement at the turn of the year. On the positive side, some service industries stand out, particularly lodging and food service, likely still benefiting from the recovery in pandemic demand and the population rise following the rise in Ukrainian refugees and exports to the country.
Construction data also surprised to the upside. The picture for the third quarter looks better than before and the analysts expect 0.5% year-on-year GDP growth. Construction output rose by 11.5% YoY in September, following an increase of 3.5% YoY in August. This is believed to be another sign that the economy is rebounding. Robust growth in infrastructure (civil engineering works +17.9% YoY) was accompanied by a rebound in building construction (+3.9%) and double-digit growth (10% YoY) in specialized works.
Average employment in the enterprise sector declined by around 6,000 in September, likely reflecting weaker demand in manufacturing. Wage growth remained in double-digits though (10.3% YoY), allowing for a further rise in real terms. The trend should continue into 2024 when the minimum wage is set to increase twice. And in service industries, this forces an adjustment of the entire wage structure for those earnings above the minimum. If, apparently, seems to be good for consumption, it actually only means a consolidation for the persistent core inflation.