Industrial production once again markedly below expectations
In accordance with data published by the GUS, the volume of industrial production sold by enterprises employing more than 9 people shrank by 1.5% YoY in August vs. a 5.2% growth in July (upward revision from 4.9%), printing markedly below market consensus (-0.4%) and our forecast (-0.5%). Industrial production growth between July and August was largely driven down by the statistical effect of an unfavourable difference in the number of working days (in July 2024, there were two days more than in the previous year, while in August 2024, there was one day less than in August 2023). Seasonally-adjusted industrial production shrank by 0.8% MoM in August vs. a 0.2% drop in July. Seasonally-adjusted industrial production over the last couple of months has been indicative of stagnation trends in the Polish industry.
Calendar effects slowing the activity in the industry
Given the impact of unfavourable calendar effects, the slowdown of annual industrial production growth was broad-based, and was seen in the three main segments of the industry, i.e. export-oriented branches (-4.6% in August vs. -1.6% in July), construction-related sectors (-4.1% vs. 5.5%) and other categories (0.5% vs. 8.2%). However, it is worth noting that production growth in the “vehicles, trailers and semi-trailers” category accelerated from -9.1% YoY in July to -1.8% YoY in August despite the impact of the unfavourable calendar effects. This is probably because the downtime for summer maintenance at car factories was shifted in time comparing to 2023. In our opinion, short-term production prospects for export-oriented branches are still unfavourable due to a lower activity in the manufacturing sector in the Eurozone, including Germany, which has led to a lower demand for intermediate goods manufactured in Poland (see MACROmap of 02/09/2024). More details on the prospects for export-oriented branches will come to light on Monday, when September’s preliminary PMI results for the Eurozone are released.
A strong drop in employment
In accordance with the GUS data published today, employment figures for the enterprise sector went down from -0.4% YoY in July to -0.5% in August, printing below market consensus that was consistent with our forecast (-0.3%). The number of employed in August went down by 18.8k comparing to July. Last month saw the strongest decline in the number of FTEs for an August since 2000. Employment figures were driven down primarily by industrial manufacturing (-10.3k), which is connected with the continuation of restructuring processes in that sector. Furthermore, some retiring employees were not being replaced by new ones, and this was also one of the reasons why the employment rate has dropped. Furthermore, the number of FTEs fell in the “transportation and storage” category as well (down by 3.1k). We believe that this particular drop in figures is most likely to be connected with collective redundancies in Poczta Polska and PKP Cargo S.A. However, except for the surprising decline in industrial manufacturing described above, the number of employees in other sectors remains relatively stable. Therefore, today’s data underpins our conclusion that we are unlikely to see the employment rate in the enterprise sector plummet in 2024.
Statistical effects boosting wages
Nominal wage growth in the sector of businesses employing more than 9 employees increased from 11.0% YoY in July to 11.1% YoY in August, printing slightly ahead of our forecast (11.0%) and market consensus (10.9%). In real terms, wages in companies rose from 6.1% YoY in July to 6.6% YoY in August. It should be noted that total nominal wage growth in August was boosted primarily by shifts in the dates of payment of salaries in the “mining and quarrying” category. The shifts caused the wage growth to slow in July and accelerate in August. Consequently, in August, real wage fund growth rate in the enterprise sector being the product of employment and average wages adjusted to take into consideration the changes in prices went up from 5.7% YoY in July to 6.0% YoY in August (8.1% in Q2). Today’s data is consistent with our scenario of annual consumption growth slowdown in H2 2024. It will be possible to assess private consumption trends more precisely when we see the retail sales data for August, which is to be published on Monday.
Moderate economic growth expected in H2 2024
Today’s data on industrial production and average wages and employment in the enterprise sector underpin our scenario, in which economic growth in the coming quarters will be boosted primarily by consumption. At the same time, the weaker-than-expected production data for August have a mitigating impact on the upside risk to our economic growth forecast for 2024 (2.3% YoY), which is connected with the release of higher-than-expected GDP growth figures for Q2 (see MACROpulse of 29/08/2024).
We believe that the overall tone of today’s data from Polish economy is slightly negative for the PLN and the yield on Polish bonds.
