Poland’s industrial production expanded 1.6% year on year in constant prices in January (chart), after a revised fall of 3.5% y/y the preceding month, unadjusted data from the statistical office GUS showed on February 20.

The reading was well below the consensus line, which expected a gain of 3.1% y/y, but low economic activity among Poland’s main trading partners weighed on Polish industrial companies, according to analysts.

“This is reflected in the decline in the production of supply goods at -4.5% y/y and in the durable consumer goods segment, which fell -1.7% y/y,” Bank Millennium said in a comment.

The extent of the recovery in the industrial sector – which is projected by most analysts in line with the general outlook for a pick-up in activity across the entire economy – may be limited throughout 2024 by the factors at play in January.

Seasonally adjusted, output grew 0.1% y/y in January, following a decline of 0.5% y/y the preceding month, GUS data showed. 

In unadjusted monthly terms, industrial production added 2.3% in January after falling a revised 9.5% month on month in December, GUS also said. The seasonally adjusted m/m reading came in at a negative 0.2%, after a gain of 2.9% m/m in December. 

Broken down by the main segments and in unadjusted terms, output expanded 1.6% y/y in January in manufacturing after a revised fall of 5.3% y/y in December. 

Output in the utility sector eased expansion to 1.5% y/y in January after a revised gain of 12.4% y/y the preceding month. 

In water supply and waste management, production accelerated growth to 10.2% y/y in January, which followed a revised gain of 1.3% y/y in December.

Production slid 4.9% y/y in mining and quarrying in January, after retreating a revised 3.6% y/y in the twelfth month, GUS data also showed.

Overall, production expanded in just 16 out of 34 industrial segments in January in y/y terms, compared to just 11 in December.

The January reading of industrial production also does not change much in the overall GDP growth outlook for Poland in 2024.

With fiscal policy set to remain relatively loose this year, inflation at a much lower level and monetary conditions having eased in recent months, the recovery has further to run as domestic demand strengthens. Analysts’ current consensus is for the GDP growth to come in at 3%-4% in 2024.

Industrial production and other January data point to the National Bank of Poland (NBP) prolonging the pause in monetary easing. The NBP cut its reference interest rate by a combined 100bp to 5.75% in September and October.

The risks to GDP growth arising from weak economic conditions in the external environment, as well as pressure to strengthen the zloty, which may increase in the wake of monetary easing elsewhere in the region, may prompt the NBP to cut interest rates “by the end of this year", Bank Millennium said.