One-off production spike

PMI below market consensus

Poland’s manufacturing PMI dropped from 49.2 pts in October to 48.9 pts in November, printing below market consensus (49.0 pts), but above our forecast (48.5 pts). This means the index remained below the 50-point mark separating growth from contraction for the 31st month running. Its drop is accounted for by lower contributions of 3 out of its 5 components (new orders, current output, inventories), with an opposite impact coming from higher contributions of employment and delivery times.

One-off production spike

In accordance with the report, a lower volume of incoming foreign orders was a substantial factor hampering the activity in manufacturing. Survey respondents voiced their concerns about subdued demand in Europe, and in Germany in particular. With fewer orders coming in, the current output in November fell despite the reduction of production backlogs. It is worth noting that the current output indicator went up above the 50-point mark only once over the last 31 months (in October 2024). It indicates that the strong growth in seasonally-adjusted industrial production showing through the GUS-released data for October (+4.6% MoM) is likely to have been a single incident (see MACROpulse of 25/11/2024). This conclusion is further supported by the index for production expected in a 12-month horizon. Although the index remained above the 50-point mark, it still fell strongly in November, down to the lowest level since December 2022. The report cites geopolitical tensions as an additional factor depressing business sentiment in the medium-term perspective, but it offers no details regarding the sources of that risk. Consequently, today’s business sentiment survey results underpin our lower-than-consensus production growth forecast for November (-2.0% YoY vs. -0.4% in October, with consensus at +0.3% YoY).

Are the restructuring processes in manufacturing nearing end?

Staffing numbers growing for the second month running are a positive signal coming from today’s survey results. The PMI report says the businesses’ objective is now to increase their production capacities by recruiting full-time employees. This trend may indicate that the restructuring processes seen in the Polish manufacturing sector over the last couple of quarters are coming to an end.

Moderate economic growth expected in Q4

PMI for November registered markedly above the Q3 average (49.0 pts vs. 47.9 pts in October), but this has no impact on our scenario of slight GDP growth slowdown in Q4 (down to 2.5% YoY vs. 2.7% in Q3). A growth in added value in services is currently of key importance from the point of view of the economic growth rate. In accordance with the survey carried out by the European Commission, the Q4 reading of the indicator of service providers’ current sentiment is at a similar level to that reported in Q3, and relatively low given historic levels.

In our opinion, today’s data is neutral for the PLN and the yield on Polish bonds.