Industrial production growth sees spectacular recovery

In accordance with the GUS data, the volume of sold production in enterprises employing more than 9 people increased by 4.7% in October, compared to a -0.4% drop in September (downward revision from -0.3%), performing well above our forecast which was consistent with the market consensus (1.8%). A key factor driving industrial production growth between September and October was the statistical effect of a favourable difference in the number of working days between September and October (in September 2024, the number of working days was the same as in the corresponding month of the previous year, while in October 2024 there was one day more than in October 2023). Seasonally-adjusted industrial production increased by 4.6% MoM in October. Historically, such a strong monthly increase in production has only been recorded five times and was mainly related to the relaxation of restrictions during the COVID-19 pandemic. As a result, after three consecutive months of drops, the level of seasonally-adjusted production reached an all-time high in October.

The favourable calendar effects led to a broad based annual industrial production growth, which was observed across the three main industrial segments: export-oriented branches (5.9% in October vs. -2.6% in September), construction-related sectors (4.3% vs. 0.3%) and other categories (4.2% vs. 0.9%). The primary driver of overall industrial growth between September and October was activity in export-oriented branches, particularly in categories such as “production of motor vehicles, trailers and semi-trailers” and “production of electrical equipment”. Greater activity in export-oriented branches may have been indirectly tied to increased trade between the Eurozone and the US in anticipation of potential tariff hikes by D. Trump’s administration. This would partly account for the sharp rise in seasonally-adjusted industrial production. Despite this temporary improvement in the industrial sector, we believe the short-term outlook remains challenging, primarily due to reduced activity in Eurozone manufacturing (especially in Germany) and the associated decline in demand for intermediate goods produced in Poland as signalled by the latest PMI readings (see MACROmap of 25/11/2024).

Continued decline of employment in industrial manufacturing sector

In accordance with the GUS data published today, the employment growth rate in the enterprise sector remained stable between September and October, standing at -0.5% YoY, and aligning with market consensus and our forecast. In monthly terms, employment fell by 4.0k in October. Employment figures were driven down primarily by the decline in the “industrial manufacturing sector” category (-2.7k people), just as it had been the case in the previous months, which was connected with the continuing restructuring processes in that sector. Layoffs at Stellantis’ Gliwice factory also contributed to the reduction. Furthermore, some retiring employees were not replaced by new ones, and this was also one of the reasons why the employment rate has dropped in the enterprise sector. In light of today’s data, we stand by our opinion that a scenario in which employment in the enterprise sector were to plummet in the coming months is unlikely.

Double-digit wage growth continues

In accordance with the GUS data published today, nominal wage growth in the sector of companies employing more than 9 employees fell from 10.3% YoY in September to 10.2% YoY in October, slightly above our forecast, which was consistent with the market consensus (10.1%). In real terms, wage growth in businesses declined to 5.0% YoY in October from 5.2% YoY in September. It is worth noting, that among the categories reported by GUS in today’s press release only two (“mining and quarrying” and "information and communication”) recorded nominal wage growth below 10% YoY, signalling sustained wage pressures.

October saw a decline in the real growth rate of the wage fund in the enterprise sector (calculated as the product of employment and the average wage adjusted for price changes) to 4.4% YoY, compared to 4.6% in September and an average of 5.5% in Q3. Today’s data is thus consistent with our scenario of annual consumption growth slowdown in H2 2024. A more detailed assessment of private consumption trends will be possible after tomorrow’s release of retail sales data for October.

Moderate economic growth in Q4 2024

Today’s significantly better-than-expected industrial production data indicate a slight upside risk to our economic growth forecast assuming a continued slowdown in Q4 (to 2.5 YoY vs. 2.7% in Q3). We believe that the overall tone of today’s data from Polish economy is slightly positive for the PLN and the yield on Polish bonds.