After two surprising and sharp declines in May and June, the Polish manufacturing PMI increased by 1.1 points month-on-month in July to 45.9, in line with expectations. Despite this improvement, the business climate index remains clearly below the neutral threshold of 50 points. This suggests that economic conditions in the domestic manufacturing sector continue to deteriorate, although at a slower pace than in June.
External Factors Weigh on Demand
In July, the pace of decline in all key PMI components slowed somewhat, although they remained relatively rapid. The survey indicates that the sector’s outlook is burdened by the situation of Poland’s trading partners. New export orders fell at the steepest rate since August 2023, with companies often citing Germany as the source of weakness. At the same time, surveyed managers were somewhat more optimistic about future production. Hopes were linked to new markets and investments, while competition from Asia was mentioned as a sales threat. Polish firms also maintained concerns about the impact of tariff increases and trade tensions.
The PMI reading aligns with the earlier published results of the economic sentiment survey by Poland’s Central Statistical Office (GUS). The seasonally adjusted general business climate index for manufacturing rose in July to -8.6 from -9.1 in June. Meanwhile, the European Commission’s Economic Sentiment Indicator (ESI) showed deteriorating moods in Polish manufacturing (from -15.4 to -15.9, with a long-term average of -13.7). Soft indicators like these do not always translate into hard economic data, so they should be interpreted cautiously. Nonetheless, despite some discrepancies, all three surveys highlight weakness in new orders. We believe these somewhat differing results reflect the varied situations of individual companies and manufacturing sectors in Poland and suggest that a broad, sustained industrial recovery is still some time away.
Hope from Improving Sentiment in Germany and the Eurozone
A chance for stronger manufacturing activity in Poland lies in the improving business climate of key trading partners, namely the eurozone and Poland’s western neighbor. The final PMI for German manufacturing rose in July to 49.1 points—the highest level in nearly three years. PMI authors note that although German industrial production is growing cautiously, this growth persists despite fading spring effects linked to increased exports to the U.S. However, ongoing inventory reductions indicate companies have not yet shifted into a sustained recovery mode. S&P Global experts emphasize that the cautious rebound in eurozone manufacturing momentum now includes more countries, with France acting as a drag due to fiscal challenges and political uncertainty around the current government. The new U.S.–EU trade agreement may support positive trends by reducing external uncertainty.
Author: Monika Siergiejuk, Macroeconomic Analysis Office, PZU
Source: https://ceo.com.pl/pmi-polskiego-przemyslu-rosnie-ale-kondycja-sektora-pozostaje-slaba-83618
