Industrial production growth boosted by strong calendar effects

In accordance with the GUS data, the volume of industrial production sold in enterprises employing more than 9 people increased to 7.9% YoY in April compared to a 5.6% decline in March (upward revision from -6.0%), running markedly above the market expectations (5.5%) and our forecast (5.9%). Industrial production growth was largely driven up by the statistical effect of a favourable difference in the number of working days between March and April (in April 2024, there were two days more than in the previous year, while in March 2024, there were two days less than in March 2023). Seasonally-adjusted industrial production went up by 7.0% MoM in April. This means that it was the third strongest monthly growth in seasonally-adjusted industrial production in the recorded history (the only time when a stronger growth was reported was in April and May 2020, when it was driven by a recovery in activity after the lockdown introduced in the first months of the pandemic had been lifted). Therefore, we are still of the opinion that the surprisingly strong decline in seasonally-adjusted industrial production seen in March was most likely connected with the difficulties related to the adjustment of data for calendar effects, which arose due to huge differences in the number of working days and to the date of Easter falling earlier than in the previous year (see MACROpulse of 22/04/2024).

Short-term prospects for export-oriented branches still unfavourable

Given the impact of favourable calendar effects, annual industrial production growth was broad-based, and was seen in the three main segments of the industry, i.e. export-oriented branches (5.0% YoY vs. -10.0% in March), construction-related sectors (8.4% vs. -9.1%) and other categories (9.3% vs. -3.3%). What is particularly noteworthy is that production in export-oriented branches did not grow much comparing to other segments of the industry. In our opinion, short-term production prospects for export-oriented branches are still unfavourable due to a lower activity in the manufacturing sector in the Eurozone, including Germany, which has led to a lower demand for intermediate goods manufactured in Poland. More details on the prospects for export-oriented branches will come to light on Thursday when preliminary April PMI results for the Eurozone are released.

Decline in employment stronger than expected

In accordance with the GUS data published today, employment figures for the enterprises sector went down from -0.2% in March to -0.4% in April, printing below market expectations and our forecast (-0.3%). The number of employed individuals shrank by 1.8k between March and April. The decline in total employment was mainly driven down by “industrial manufacturing sector” (-2.1k) and “trade and repair of motor vehicles” (-1.6k). The decline in employment in the manufacturing sector is indicative of the continuing restructuring processes in that sector. In our opinion, business survey data for industrial manufacturing combined with labour market data showing that the number of people declared by the companies to be laid off is low, and also with a historically high level of vacancies show that the said restructuring processes will be gradual in the months to come. The restructuring processes will involve staff turnover, which means that the employees will be accepting job offers in the sectors in which the demand for workforce is still high. Bearing in mind that consumption will be the main driver of the economic recovery that we expect to take place in the quarters to come, the demand for the labour force will increase primarily in those sectors that are mostly consumer-oriented, i.e. in the services and consumption goods production sectors. In other words, we are still of the opinion that the scenario in which employment in the enterprises sector were to plummet in 2024 is unlikely.

Real wage growth curbed by higher inflation

Nominal wage growth in the sector of companies employing more than 9 employees fell from 12.0% YoY in March to 11.3% YoY in April, running below the market consensus (12.1%) and our forecast (11.6%). Nominal wage growth acceleration was broad-based, and was seen in most categories reported by the GUS. In real terms, after the adjustments made to take into consideration the changes in prices, wages in companies rose by 8.7% comparing to a 9.8% growth in March as a result in a slower growth in nominal wages and the inflation rise that was seen in April (see MACROpulse of 15/05/2024). A slower growth in employment combined with a slower growth in real wages in the enterprise sector resulted in a decrease 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 8.7% YoY in April vs. 9.5% in March and 9.2% in Q1. This, however, has no impact on our consumption recovery scenario (see MACROmap of 15/05/2024). This is because wages across the entire economy grow markedly stronger than in the enterprise sector (in Q1, wage growth across the entire economy stood at 14.4% YoY comparing to 12.6% in the enterprise sector alone). It will be possible to assess private consumption trends more precisely when we see the retail sales data for April, which is to be published tomorrow.

GDP growth to accelerate in Q2

Today's data on industrial production, average wages and employment in the enterprise sector have no impact on our forecast, according to which Poland's GDP will grow by 2.7% YoY in Q2. At the same time, we believe that the overall tone of today’s data from Polish economy is neutral for the PLN and the yield on Polish bonds.