Poland’s manufacturing PMI increased to 47.5 pts in January vs. 45.6 pts in December, running clearly above market consensus (46.2 pts) and our forecast (46.1 pts). This means that the index remained below the 50-point level separating growth from contraction for nine consecutive months. The PMI increase resulted from higher contributions of 3 out of its 5 components (current output, new orders, and delivery times), while lower contributions of employment and stocks of purchases had the opposite effect.

What is particularly noteworthy about the data is that the decline in current output and new orders (incl. export orders) became significantly slower. Nonetheless, the companies taking part in the January survey still reported that the demand remained weak, driven down by economic downturn. With current output and new orders continuing to decline, the companies kept on pursuing their restructuring processes (see MACROmap of 02/01/2023). This was reflected in a further reduction of inventories of both final goods and intermediate goods used in the production process as well as in workforce cuts, whose scale got larger in January.

January also saw a further acceleration of growth for both output and input prices. It is worth noting that those indicators followed a downward trend over the last couple of months. Moreover, the price growth accelerated despite a significant decline in demand. The surveyed companies explained that the rising prices of energy, raw materials and semi-finished goods were the reason behind that growth.

Despite the continuing activity slowdown in the Polish manufacturing sector, January saw a strong increase in the index value for the production expected in a 12-month horizon with the value reaching its highest level since May 2022, which means that it stayed over the 50-point level for three consecutive months. This indicates that the restructuring processes launched by many companies to improve their efficiency and reduce the energy consumption, the milder-than-expected economic growth slowdown in Q4 2022 in Poland (see MACROpulse of 30/01/2023), and the economic upturn reported by Poland’s main trade partners in January (MACROmap of 30/01/2023) made some of the companies become more optimistic about their future activities. A significant increase in the expected output component value supports our “soft landing” scenario for the Polish economy, in which GDP growth in Poland in 2023 will remain positive despite a significant slowdown. We will publish our revised economic growth scenario for Poland including this week’s GDP data for 2022 in the next MACROmap.

In our opinion, today’s data is slightly positive for the PLN and the yields on Polish bonds.

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