Poland’s industrial production contracted 1.5% year on year at constant prices in August (chart), after a revised gain of 5.2% y/y the preceding month, unadjusted data from the statistical office GUS showed on September 22.

The reading was clearly below the consensus line, which expected no change y/y in the eighth month due to fewer working days than in July. But poor demand for foreign markets overwhelmed the calendar effect, analysts say.

“Production data and domestic export figures indicate poor performance in industries connected to foreign markets. In particular, the slump in the German automotive sector is unfavourable for Polish manufacturers and may pose a significant structural challenge in the medium term,” ING said.

Seasonally adjusted, output expanded 0.6% y/y in August, following a gain of 2.2% y/y the preceding month, GUS data also showed. 

In unadjusted monthly terms, industrial production declined 5.2% in August after a revised fall of 3% month on month in July, GUS also said. Seasonally adjusted, output slid 0.8% m/m after contracting 0.2% m/m the preceding month. 

Broken down by the main segments and in unadjusted terms, output fell 1.7% y/y in August in manufacturing following a revised gain of 5.4% y/y in July. 

Output in the utility sector grew 0.2% y/y in August after a revised increase of 0.5% y/y the preceding month. 

In water supply and waste management, production eased growth to 8.1% y/y in August after adding a revised 10.6% y/y in July.

Production fell 7.8% y/y in mining and quarrying in August, after growing a revised 2.5% y/y in July, GUS data also showed.

Overall, production expanded in 16 of 34 industrial segments in August in y/y terms, compared to 26 in July.

August industrial production data are not having analysts rethink their outlook for the near-term performance of the industrial sector and the economy overall – yet.

“August data do not make us pessimistic about the outlook for industrial production in Poland, and we expect moderate growth in the coming months. However, a negative surprise in September data could prompt a reassessment of this forecast,” Santander Bank Polska said. 

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

“With rising inflation and persistently high wage growth, the NBP will keep interest rates unchanged in the coming months. Room for interest rate cuts is expected to emerge next year,” Bank Millennium said.

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