Sharpest decline in confidence in Polish manufacturing since 2020
Unexpected deterioration in Polish manufacturing
The PMI for Polish manufacturing came in at 46.1 pts in June, down from 49.4 pts in May and below both our forecast (49.0 pts) and the market consensus (49.7). The deterioration in June reflected declines across all components of the index, namely output, new orders, employment, suppliers’ delivery times and stocks of purchases. The PMI has now remained below the 50-point threshold, which separates expansion from contraction in economic activity, for 14 consecutive months.
Sharp decline in manufacturing orders
Of particular note in the June PMI was the decline in the new orders component to 42.6 pts in June (the lowest level since June 2025), accompanied by a fall in the new export orders component to 44.8 pts (the lowest level since July 2025). Both components therefore signalled a rapid decline in new orders in June. According to surveyed firms, the decline in new orders reflected “weaker demand, an economic slowdown, difficulties gaining new customers, high customer inventory levels and reduced client budgets”. In our view, the acceleration in the decline in new orders in June was partly driven by an unfavourable base effect associated with the sharp increase in orders received by defence manufacturers following the launch of the SAFE programme, as indicated by Statistics Poland (GUS) data showing very strong growth in industrial orders in May this year. The deescalation in the Middle East was another factor driving the decline in orders in Polish manufacturing, as it eased concerns about supply chain stability and reduced purchases of production inputs following their temporary increase in May. The component measuring such purchases fell in June to its lowest level since February 2026.
Firms continue to adjust employment
The decline in orders contributed to a fall in output, which – following a temporary increase in May – declined in June at the fastest pace since July 2025. The decline was partly offset by the fulfilment of previously accumulated production backlogs, the level of which decreased in June at a pace only slightly slower than in May. Lower manufacturing activity also contributed to a further decline in employment, which, according to surveyed firms, reflected “falling orders, cost-cutting, reduced production needs and the non-renewal of contracts”. The reasons for job cuts cited by firms indicate that, alongside demographic factors (employees reaching retirement age), an important factor behind the ongoing decline in manufacturing employment is the need to adjust staffing levels to subdued demand and rising costs.
Cost pressures are easing
June marked the second consecutive month in which the component measuring input costs declined, although its level continued to indicate rapid cost growth. The decline in this component points to easing cost pressures in Polish manufacturing associated with higher commodity prices and transport costs resulting from the conflict in the Middle East. In June, companies continued to take steps to pass higher costs on to end customers, which was reflected in the continued rapid increase in prices of finished goods. As in the case of input costs, the component measuring growth in output prices declined for the second consecutive month in June, signalling weaker pressure on consumer goods prices. In our view, the decline in the input cost and output price components in June indicates a gradual fading of the pro-inflationary effects of the conflict in the Middle East.
Sharpest decline in confidence in Polish manufacturing since 2020
The June PMI results point to a marked deterioration in the outlook for Polish manufacturing. The index measuring output expectations over the next 12 months fell in June to its lowest level since December 2022, while coming in slightly above the 50-point threshold separating expansion from contraction. Moreover, compared with May this year, the index declined by 10.2 pts, marking its largest month-on-month fall since March 2020, i.e. since the onset of the COVID-19 pandemic (excluding that period, the decline recorded in June this year was the largest in the history of the available series). When assessing demand prospects, surveyed firms expressed concerns about “demand conditions and supply shortages”. In our view, the sharp decline in confidence in Polish manufacturing recorded in June is surprising given the inflow of substantial orders received by defence manufacturers, as well as the continued strong outlook for consumer and investment demand. The decline in confidence in Polish manufacturing in June signals downside risk to our 2026 economic growth forecast. A more comprehensive assessment of that risk will be possible following the release of June industrial production data.