Production data shows a mixed picture. The outlook for investments is improving

Industrial production still below the peak of October 2024

In accordance with data published by Statistics Poland (GUS), the sold industrial production in enterprises employing more than 9 people went up by 3.9% YoY in May compared with April’s 1.2% growth, coming below market consensus (4.4%) and above our forecast (3.0%). Annual production growth in May was supported by last year’s low base (seasonally-adjusted production in May 2024 had dropped by 1.0% MoM). Seasonally-adjusted industrial production increased by 0.2% MoM in May. The data came as a surprise in light of the May PMI results (see MACROmap of 02/06/2025). Consequently, industrial production in May stood 2.4% below its peak of October 2024 despite the growth observed over the last couple of months.

Broad-based industrial production growth

Annual industrial production growth accelerated in all three main industrial segments, i.e. export-oriented sectors (5.6% YoY in May vs. 1.9% YoY in April), construction-related sectors (11.2% vs. 1.8%) and other sectors (1.6% vs. 0.7%). Notably, the situation is improving in the export-oriented sectors, with annual industrial production growing for the third month running. Two-digit production growth in May was seen in “machinery and equipment” (+14.1% YoY) and “other transport equipment” (+12.6%) categories. In this context, it is worth paying attention to the flash German manufacturing PMI released today, which has shown a continued growth boosted by increases in new orders (including export orders) and current output. Recovery in the German manufacturing sector will stimulate a greater demand for intermediate products manufactured in Poland in the months to come. Increased uncertainty connected with the growing tensions in the global trade is still a risk factor for activity recovery in export-oriented sectors.

Investments boosted by restructuring processes in enterprises

Particularly noteworthy about the industrial production data is the continued, strong growth in the production of capital goods seen over the last couple of months (10.4% YoY in May vs. 7.5% in April and 10.5% in March). In our view, it indicates that the enterprises are making investments related to their restructuring processes. This is consistent with our forecast for total investments, which are projected to rise by 7.4% in 2025 and 2026, following a 2.2% drop in 2024.

Construction and assembly production at its lowest since 2021

Construction and assembly production growth improved from -4.2% YoY in April to -2.9% in May, printing below the market consensus (-2.5%) and above our forecast (-3.0%). In May 2025, seasonally-adjusted construction and assembly production shrank by 0.5% MoM, marking the fifth consecutive drop. Consequently, construction sector in May recorded the lowest activity level since December 2021. Construction and assembly production growth accelerated in two categories: “construction of buildings” (-9.0% YoY in May vs. -10.3% YoY in April) and “civil engineering works” (-1.4% vs. -8.3%). Only firms performing specialised construction works saw growth slow to 2.6% YoY in May from 10.5% in April.

Recovery in construction sector will be delayed

The continued construction and assembly production drop and the production structure indicate that activity in construction and investments is recovering more slowly than we anticipated. We have not changed our conclusion, though, that the EU funds that Poland is receiving under the National Recovery Plan and Multi-Annual Financial Framework for 2021-2027 will be boosting the activity in the construction sector in the coming quarters. We still expect infrastructure investments to be a main construction and assembly production growth driver in the quarters to come, and the role of households’ housing investments and corporate investments will remain to be limited. Unfavourable supply factors such as decreasing labour supply or limited availability of certain materials will be slowing down the recovery in the construction sector, which will not become markedly visible until 2026, though (see MACROmap of 14/04/2025).

Employment in the enterprise sector keeps going down

In accordance with the GUS data published today, the employment growth rate in the enterprise sector remained stable between April and May, standing at -0.8% YoY, printing below the market consensus that was consistent with our forecast (-0.7%). In monthly terms, the number of employed in May fell by 13.5k. Consequently, this represented the strongest decline in employment for a May since the outbreak of the pandemic. It had already been indicated by the data released by the GUS, which had shown a record number of lay-offs planned for the end of April 2025 as part of collective redundancies (74.1k individuals, including 58.6k in the public sector). The decline in employment was broad-based, though in absolute terms it was concentrated in the manufacturing sector (5.8k individuals). In our view, the trend to lower the employment observed in the enterprise sector over the last couple of quarters resulting from the impact of adverse supply (decreasing labour force resources, with baby boomers reaching the retirement age) and demand factors (weak external demand, low utilisation of production capacities in manufacturing and the related low investment demand on the part of the enterprises), which are the main reason behind the employment reduction in manufacturing, trade and services (see MACROmap of 12/05/2025) will persist in the months to come.

Real wage fund growth accelerates

Nominal wage growth in enterprises employing more than 9 people fell from 9.3% YoY in April to 8.4% in May, printing below the market consensus (8.8%) and our forecast (9.0%). The annual wage growth slowed due to the last month’s high base effect, with April seeing the strongest monthly wage growth since April 2019. In real terms, wage growth in enterprises slowed to 4.2% YoY in May vs. 4.8% YoY in April, and the real wage fund growth rate went up to 4.2% YoY vs. 4.0% in April and 2.3% YoY in Q1. This poses a slight upside risk to our forecast, in which consumption growth slowed down to 2.1% YoY in Q2 vs. 2.5% in Q1.

Upside risk for our GDP growth forecast

Today’s data on industrial production, construction and assembly production, and wages and employment in the enterprise sector pose an upside risk to our economic growth forecast for Q2 (2.9% YoY vs. 3.2% in Q1) and 2025 (3.1% vs. 2.9% in 2024). At the same time, in our view, the risk is growing that the Monetary Policy Council will not decide to cut interest rates by 50bp in July. We believe that the overall tone of today’s data from Polish economy is neutral for the PLN and the yields on Polish bonds.