Margins decline as production costs grow faster in Polish manufacturing

PMI edges down in August

The PMI for the Polish manufacturing sector fell to 48.3 pts in August from 49.0 pts in July, coming in below our forecast of 49.2 pts, which was in line with the market consensus. The deterioration in the index reflected lower contributions from 3 of 5 components: new orders, output and employment, whereas higher contributions from stocks of purchases and suppliers’ delivery times supported the PMI. The PMI has now remained below the 50-point threshold separating expansion from contraction in activity for 16 consecutive months.

Faster decline in new export orders despite the recovery in German manufacturing

Within the August PMI, particular attention should be paid to the decline in total new orders, which has continued uninterrupted since April 2025. The pace of decline accelerated in August, with surveyed companies attributing weaker demand to a fall in orders in key sectors, including construction, and competitive pressure from imports from China. This assessment is consistent with our analyses, which indicate that the number of product groups recording rapid growth in imports from China, accompanied by a significant decline in the prices of imported products, is gradually increasing (see MACROmap of 16/02/2026). The decline in total new orders was accompanied by a slightly faster fall in export orders than in July, which is surprising in light of PMI data indicating a significant increase in orders and output in Eurozone and German manufacturing (see MACROmap of 24/08/2026). This signals that the factors supporting the recovery in Eurozone manufacturing activity to date, such as precautionary inventory accumulation amid persistent disruption to supply chains from the Middle East, growing demand for artificial intelligence-related technologies and increased equipment orders resulting from higher defence spending, have not contributed to a marked improvement in conditions in Polish manufacturing. The decline in total new orders weighed on current output. The pace of decline in output accelerated compared with July and, as in previous months, was mitigated by a reduction in backlogs of work.

Lower margins help contain the inflationary effects of the conflict in the Middle East

The August PMI data indicates a marked intensification of supply-chain pressures. Average suppliers’ delivery times lengthened to the greatest extent since June 2022, which surveyed companies attributed to production delays and transport problems. Supply-chain disruption and shortages of raw materials contributed to an increase in production costs, with cost inflation accelerating for the first time in four months. The faster rise in production costs reflected higher prices of raw materials, fuels and transport, which were linked to geopolitical tensions. It is worth noting that, according to the survey, the faster rise in production costs was accompanied by slower growth in finished goods prices. This indicates that, despite the ongoing recovery in domestic demand in Poland, surveyed companies reduced their margins to increase sales, limiting the scale of the inflationary effects of the conflict in the Middle East.

Companies continue their “soft restructuring”

The August PMI data indicated a decline in employment in Polish manufacturing following the increase recorded in July, which came after 15 consecutive months of falls. According to surveyed companies, the decline in employment reflected staff departures, retirements, cost-cutting measures and lower production requirements due to reduced order levels. This signals that “soft restructuring” is continuing in Polish manufacturing, reflecting the need to increase productivity amid persistent wage pressures, rising production costs and intensified competitive pressure from imports from China.

Manufacturing remains resilient to the conflict in the Middle East

In August, the index measuring output expectations over a 12-month horizon rose again, reaching its highest level since May this year and coming in significantly above the 50-point threshold. In assessing the demand outlook, surveyed companies cited the acquisition of new contracts, improving market conditions and measures aimed at clearing backlogs and broadening their product ranges. Both the increase and the high level of the future output index signal that the escalation of the conflict in the Middle East recorded in July and August this year, together with the associated supply-chain disruption and increase in cost pressures, did not contribute to a deterioration in assessments of the short-term outlook for output in Polish manufacturing. This indicates that the sector remains highly resilient, as reflected in the continued growth in industrial production (see MACROpulse of 20/08/2026), supported by higher corporate capital expenditure (see MACROmap of 31/08/2026) and investment co-financed with EU funds obtained under the National Recovery Plan and SAFE programmes.

In our view, today’s PMI data is neutral for the PLN exchange rate and yields on Polish bonds.