Polish industrial production rose by 0.3% year-on-year in June. This follows a decline of 1.6% YoY after a slight upward revision from -1.7% in May, despite negative calendar effects and weak demand for Polish exports from main trading partners like Germany and France. Manufacturing output rose only by 0.1% YoY, while notable increases were recorded in energy generation (+2.9% YoY) and water supply, sewage and waste management (+4.3% YoY). Seasonally adjusted data showed a growth of 1.8% month-on-month.

June’s industrial data confirms a continued slow recovery in the sector. ING estimates that in the second quarter of this year, production increased by around 2.2% YoY, after five quarters of declines on an annual basis.

The production of energy-related goods and consumer durables increased in June, up by 5.3% YoY and 4.4% YoY respectively. Against this backdrop, the production of capital goods (-3.0% YoY) and intermediate goods (-2.0% YoY) was weaker. Production growth was recorded in 21 out of 34 industry sectors.

The largest increases occurred in other transport equipment (30.4% YoY), chemicals (11.2% YoY) and paper products (6.9% YoY). Declines were recorded in the manufacturing of electrical equipment (-29.2% YoY), including batteries for electric vehicles, the repair, maintenance and installation of machinery and equipment (-10.9% YoY), and the manufacturing of beverages (-9.5% YoY).

Analysts estimate that GDP growth in the second quarter was close to 3% YoY, following a 2.0% YoY increase in the first quarter. They continue projecting economic growth of 3% in 2024, mainly based on a recovery in consumption.

Producer prices (PPI) fell by 6.1% YoY in June, following a 7.0% YoY decline in May. Prices in manufacturing fell by 5.2% YoY, in energy generation by 15.3% YoY and in mining by 5.5% YoY. Prices increased in water supply and sewage and waste management (2.5% YoY). Producer price deflation is believed to prevail until the end of 2024.

In June, average wages in Poland’s business sector rose by 11.0% YoY. Next month, the YoY wage growth rate may fall below 11.0% as the market gradually cools. Wage growth could reportedly return to single-digit levels in 2025.

At the same time, employment in the business sector fell by 0.4% YoY (0.5% YoY in May). The smaller magnitude of the decline in employment than in May is mainly due to the base effect rather than an improvement in the labour market. The update indicates a gradual deterioration in the labour market, which is reacting with some delay to the weaker economy in 2023 and the first half of this year. This is particularly evident in manufacturing and administration.

However, supply constraints, including the decline in the working-age population and the outflow of migrants, mean the labour market remains tight. According to Eurostat, Poland has the second lowest unemployment in the EU. In addition, a series of increases in the minimum wage and adjustments for high inflation in the past are keeping wage growth at double-digit levels.

ING expects wage growth to return to single-digit levels in 2025 (c.7.5% YoY) on the condition of the expiration of the impact of this year’s minimum wage changes and supposedly companies’ difficulties in passing on rising labour costs to final consumers. Hope dies last.