Industrial production fell by 6.0% YoY in March after increasing by 3.3% YoY in February. According to ING, the decline was mainly due to the unfavourable calendar effect (two business days less). After correcting the data for the calendar effect, the production rate is similar to February (+0.7% YoY). Data adjusted for the influence of seasonal factors indicates a decline in production of 3.9% YoY and 5.5% MoM.

This is inconsistent with signals of a slow recovery in global industry (even in Germany) although they remain fragile and may suffer from geopolitical tensions. Timid production despite the recovery in domestic demand indicates still weak exports. Companies are facing competition from Asia, while demand from Poland’s main trading partners is still relatively weak.

Enterprise sector employment shrunk by 0.2% YoY in March, the same as in February. Labour demand has gradually deteriorated, particularly in manufacturing. High minimal wage growth and strong bargaining power among workers resulting from Poland’s tight labour market conditions go in hand with the wage increases in the public sector introduced in March and April.

Companies continue to hoard labour, fearing they will not be able to replenish their workforce when the economy improves. Working in tandem with pro-social government policies, this should result in double-digit nominal wage growth this year.

While demand for real estate recovered in the second half of last year due to a government mortgage support scheme, this has not yet been reflected in construction. In 2023, real estate developers rushed to finish ongoing projects so that they could qualify for the government’s programme. As a result, the number of flats under construction started to fall late in the year and has only marginally recovered so far in 2024. The sector could recover later this year under the condition of a rise in real estate demand (and prices).

On the other hand, the dismal performance of infrastructure-related construction reflects the completion of projects financed under the previous EU perspective 2014-2020. At the same time, projects from the new EU perspective saw a relatively slow start. Delayed access to the Recovery Fund also indicates that projects financed from this source should begin in 2025 and 2026. Consequently, 2024 should remain a weak year for infrastructural investments as a whole.