Production is stable while real wage growth accelerates

Industrial production recovery helped by calendar effects

In accordance with the GUS data, the volume of sold production of industry in enterprises employing more than 9 people increased by 1.6% YoY in October vs. +3.1% in September, printing in line with consensus and above our forecast of -0.5%. Industrial production growth was largely driven up by the statistical effect of a favourable difference in the number of working days between September and October (in October 2023, there was one day more than in the previous year, while in September 2023 there was one day less than in September 2022). Seasonally-adjusted industrial production shrank by 0.1% MoM in October.

Export-oriented branches still with the poorest performance

Production growth acceleration was broad-based due to the impact of favourable calendar effects, and was reported in most categories. Consequently, the three main segments of the industry, i.e. export-oriented branches (-0.3% YoY vs. -1.3%), construction-related sectors (0.0% vs. -0.5%) and other categories (1.8% vs. -1.3%) saw the production grow between September and October.

In October, production growth accelerated in the “vehicles, trailers and semi-trailers” category (from 1.0% YoY in September to 7.5%), which can be seen as the continuation of trends showing through the data on trade balance, with the continuing, strong growth in the export of cars having been observed in September (see MACROmap of 20/11/2023). It is also worth noting that we could see the furniture industry production grow above the 0% mark for the first time since May 2022 (1.1% YoY vs. -4.1% in September).

Two categories where the largest part of production is sent abroad (“computers, electronic and optical products” and “electrical equipment”) stand out from other sectors in a negative way. YoY production in those categories deteriorated from already subdued levels despite the impact of October’s favourable statistical effects mentioned above. It is consistent with our conclusion saying that the continuing slowdown in the manufacturing sector’s activity in the Eurozone (and particularly in Germany), resulting in a decreased demand for intermediate goods manufactured in Poland, is the main factor behind the slowdown in the Polish industry over the last couple of months. Taking into account our economic growth forecast for the Eurozone and Germany, we expect the production in export-oriented sectors to accelerate only in Q1 2024. Production growth will be boosted in the months to come by inflation fall pushing the activity up in those sectors of the industry, where production is intended primarily for the domestic market.

Rewards in the mining sector boosting the wage growth

In accordance with the GUS data published today, nominal wage growth in the companies of the enterprise sector, employing more than 9 employees increased from 10.3 YoY in September to 12.8% YoY in October, printing markedly above the market consensus that was consistent with our forecast (11.8%). In real terms, after adjusting for price changes, wages in businesses rose by 3.2% YoY in October vs. a 2.0% growth in September. Therefore, the real growth rate turned out to be the strongest since August 2021.

Rewards and bonuses paid out in the mining sector were the main factor driving nominal YoY wage growth up between August and September. Consequently, wage growth in the “mining and quarrying” category rocketed from 1.2% YoY in September to 61.2% in October, boosting the total wage growth in the enterprise sector by 1.4 pp, though the growth would still have accelerated even without their impact. Nonetheless, we still expect the nominal annual wage growth to follow a mild downward trend in the quarters to come, and we still believe the same will apply to average wages across the entire economy. The inflation drop that we expect to take place, combined with the related wage pressure ease in the enterprises will be the main factor slowing the nominal growth in wages down in the quarters to come.

Employment growth below the 0% mark for the first time since March 2021

Employment growth in the enterprise sector fell from 0.0% YoY in September to -0.1% in October, printing in line with our forecast and below market consensus (0.0%). This means that the employment growth went down below the 0% mark for the first time since March 2021, with the number of employed falling by 2.0k between September and October. Workforce cuts in the manufacturing sector (a 4.4k drop MoM in terms of the number of employed) remained the main factor driving the employment growth down, which confirmed that the restructuring processes running in this sector over last couple of months were still in progress.

Employment decline combined with real wage growth in the enterprise sector resulted in an increase in the real wage fund growth rate in the enterprise sector, the rate being the product of employment and average wage adjusted for changes in prices, to 3.1% YoY in October (highest since April 2022) vs. 2.0% YoY in September and 1.1% YoY in Q3. It supports our consumption growth forecast (2.3% YoY in Q3 vs. 1.2% YoY in Q2). It will be possible to assess private consumption trends more precisely when we see the retail sales data for September, which is to be published tomorrow.

First symptoms of recovery

Today’s data confirm that our scenario of economic recovery solidifying in Q4 aided by consumption-stimulating inflation drop is materialising.

In our opinion, the labour market and industrial production data for October are neutral for the PLN and yields on Polish bonds.