Poland’s industrial production contracted 0.3% year on year in constant prices in September (chart), after a revised fall of 1.2% y/y the preceding month, unadjusted data from the statistical office GUS showed on October 21.

The reading was clearly below the consensus line, which expected a gain of 0.3% y/y in the ninth month, as poor demand for foreign markets overwhelmed the calendar effect, analysts say.

The dependency on foreign demand does not need to be the decisive factor in Poland’s industrial sector’s performance, however.

“We believe that this is a temporary weakness. The investment impulse related to EU funds is slowly gaining momentum. This year, Poland will receive around PLN20bn [€4.63bn] from the EU’s pandemic recovery fund and - in 2025 - more than PLN60bn in structural funds,” ING said.

Poland can avoid the kind of industrial stagnation currently experienced by Germany and the Czech Republic because it can mobilise domestic growth factors.

“In addition to robust consumer spending, there is optimism for a resurgence in public investments, as well as an acceleration of private investments, driven by the multiplier effect,” ING also said.

Driven by consumption and investment, Poland's GDP is expected to grow between 3% and 4% in 2024 before accelerating to nearly 4% in 2025, according to Bank Millenium.

Seasonally adjusted, output expanded 0.4% y/y in September, following a gain of 0.6% y/y the preceding month, GUS data also showed. 

In unadjusted monthly terms, industrial production expanded 9% in September after a revised fall of 4.9% month on month in August, GUS also said. Seasonally adjusted, output slid 0.2% m/m after contracting 0.8% m/m the preceding month. 

Broken down by the main segments and in unadjusted terms, output declined 0.3% y/y in September in manufacturing following a revised fall of -1.4% y/y in August. 

Output in the utility sector grew 1.6% y/y in September after a revised increase of 1.3% y/y the preceding month. 

In water supply and waste management, production eased growth to 6.9% y/y in September after adding a revised 8% y/y in August.

Production fell 7.3% y/y in mining and quarrying in September, after retreating a revised 7.2% y/y in August, GUS data also showed.

Overall, production expanded in 17 of 34 industrial segments in September in y/y terms, compared to 16 the preceding month.

Industrial production and other September data point to the National Bank of Poland (NBP) prolonging the pause in monetary easing, analysts say.

In an environment of rising inflation and still high - although slowing down - wage growth, the NBP is expected to maintain interest rates at current levels in the coming months. 

“Space for rate cuts may emerge next year as inflation begins to decline and regulatory uncertainty decreases. Our baseline scenario predicts rate cuts starting in the second quarter of next year,” Bank Millennium said.

The NBP cut its reference interest rate by a combined 100bp to 5.75% in September and October last year.