In December, the PMI index for Polish industry fell for the first time in four months. The ongoing decline in the volume of new orders, ongoing for nearly two years now, also accelerated, influenced among others by weak demand from France and Germany. “It seems that in the first months of the new year, we can still expect a decline in production in Polish industry,” says Mariusz Zielonka, economic expert of the Confederation of Leviathan. The companies, however, anticipate that despite all, domestic consumption will again pick up in 2024, which will compensate them for the lack of new orders from abroad. Therefore, analysts forecast that, despite recent negative data, the Polish economy will return to a growth path.
“PMI has fallen again and continues to remain below the 50-point threshold, which indicates a recession. This shows that our industry is not yet ready for the rebound expected by economists. Export still dominates in it, and the lack of new orders from abroad will mean that the Polish industry will be in a rather poor condition and enters the new year in such a way, ” Mariusz Zielonka told the Newseria Biznes agency.
The PMI index for the industry was 47.4 pts in December, compared to 48.7 pts in November – reported by the S&P agency. This is a significantly worse result than economists expected, who – after the sharp, November increase in PMI by over 4 pts – mostly expected a minor correction. According to analysts, this means that hopes for a return to growth and a revival in the sector, which appeared after the November increase, turned out to be premature. The latest reading shows that at the end of 2023, the Polish industry was still struggling with a recession caused, among others, by the weakness of foreign demand.
“One of the main problems the Polish industry is grappling with is a lack of new orders and basically we’re setting a record because at the moment we have 22 months of decline in the PMI sub-index for new orders. As a result, we have a decline in production and managers working in industry assume that it is better to adopt a waiting attitude, which, for example, when employees resign, there are no new recruitments. That’s why we see that the labor market in Poland is currently in a phase of some stabilization, not to say stagnation,” assesses the economic expert of the Confederation of Leviathan.
The S&P report analysts pointed out that December brought the 22nd consecutive monthly decrease in the volume of new orders – both domestic and export – received by Polish manufacturers. This sequence of declines is close to the historical record – only a month longer was the period of weakening demand at the beginning of the 21st century: from September 2000 to July 2002. Furthermore, the pace of decline in the number of new orders in the Polish industry (resulting from, among others, weak demand from France and Germany) has accelerated for the first time in four months, leading to a sharper cut in production.
“Our entire industry is basically dependent on what’s happening in the West,” explains Mariusz Zielonka. “We’d like to believe that domestic consumption in Poland – which, hopefully, will start – will be enough for the Polish industry. However, this seems impossible. What’s happening in the West – especially our western neighbors – is very important for how our economy works. If Germany expects a decline in GDP and a slowing down of the economy, it will also greatly affect us. These are connected vessels and at the moment it seems that in the first months of the new year we can still expect a decline in production in the Polish industry.”
As the expert emphasizes, companies are expecting that despite everything, domestic consumption will pick up again in 2024, compensating them for the lack of new orders from abroad. The coming year in Germany, which is Poland’s main trading partner, does not promise to be the best, so the coming months will rather bring a predominance of imports (to satisfy domestic demand) over exports.
“It seems that an increase in consumption will take place and now the Polish industry will have to base itself on it, on what’s happening in Poland,” the expert assesses. “The electricity market crisis was a major pain point for this sector last year and from the hard data, it was clear that the Polish industry – especially energy-intensive ones such as metallurgy, chemicals – recorded huge declines of over 20%. Now, looking at electricity prices, it seems that this will not be such a big problem anymore and the Polish industry will suffer much less than last year.”
According to S&P, the PMI index for the Polish industry averaged 46.2 pts throughout 2023 and in the entire 26-year history of this study, a worse result was recorded only twice (in 2001 and 2009, in both cases the result was 45.6 pts then). However, in terms of quarters, the PMI index for Q4 averaged 46.9 pts, a higher result than the values achieved in Q2 and Q3.
Analysts of the Polish Economic Institute in a comment published on X (formerly Twitter), rated that the last, December decline of this indicator is rather a “technical reaction” after a very good result in November than a real negative signal. PIE also notes that the results of the domestic industry are good compared to the other EU countries – in the Czech Republic or Germany, the value of the PMI index is still close to 43 pts. Analysts expect, despite the recent negative data, that the Polish economy will bounce back in 2024.
Similar forecasts are also drawn up by the economic expert of the Confederation of Leviathan. With a stable geopolitical situation, he expects that in 2024, the growth of Polish GDP will oscillate around 2.4-2.8%. The main engine of this growth is expected to be a cash injection from the National Recovery Plan, which will drive a clear increase in investment (according to the expert’s expectations of 4.5%), as well as a rebound in domestic consumption.
“Consumption is this quick mechanism that can work wonders and boost the economy. Although of course it has its consequences in the form of when we start to buy more, prices may start to rise again at a faster pace than they have risen so far,” says Mariusz Zielonka.
