Industrial production unexpectedly increased strongly. This drew attention primarily because over the last few months, but even years, we have been dealing with stagnation in this part of the economy.
The industry has boomed, the Prime Minister is rejoicing
The report of the Central Statistical Office for October surprised all economists. Production increase by 4.7%. year to year can be partly explained by the larger number of working days (two more than in September and one more than in October last year), but this is only a fragment of the explanation. Even if seasonal factors are taken into account, production still recorded a strong increase. In addition, optimism spread widely across industrial sectors (production increased in 30 out of 34 of them).
“The end of stagnation in the industryalthough with a slight delay, is becoming more and more visible,” commented PKO BP economists. “Production industrial in October tore out of his shoes – one month was enough to end and surpass three years (!) of industrial flaut. Seasonally adjusted index on a new one all-time maximum” – this was an excerpt from a quick commentary by Pekao SA experts, published on website
Donald Tusk and Minister of Finance Andrzej Domański They must have read these comments, in any case, their entries on X repeat some of the experts' opinions. “Finally! In October, according to analysts' forecasts, production was supposed to increase by 1.8 percent, and yet we have 4.7 percent! And this despite the constantly deteriorating situation in our western neighbors,” he wrote prime minister. “Industrial production up by 4.7% y/y (clearly above analysts' expectations). Industrial processing is growing by as much as 5.0% y/y. The vast majority of sectors are recovering. Seasonally adjusted production index is the highest in history! We are accelerating” – these are the words of the head of the Ministry of Finance.
Why is production increasing?
Economists draw attention to several issues in their in-depth comments. In addition to the already mentioned broad rebound and the impact of more calendar days, they note that:
- Production in the “other transport equipment” category increased significantly (by 36.5% year-on-year), which was due to the modernization of the railways, which also attracts foreign investors.
- Probably overall demand from abroad improved. Some economists point out that the pessimistic perception of the economic situation in Europe is somewhat exaggerated. Others emphasize, however Germany's weaknessespecially in the context of growing competition from China and the changing of the guard in the position of the US president – which will result in the introduction of tariffs.
- It is possible that in October the industry “made up” for what had not been achieved a month earlier.
- It is possible that it is already starting to become visible investment accelerationwhich support the incoming ones EU funds. This year, we will receive PLN 15 billion from KPO (this is ING's estimate).
- Production increase conquered export industries (categories: “production of motor vehicles, trailers and semi-trailers” and “production of electrical equipment”). This may be partly due to bulk orders and increasing trade between the euro zone and the United States before Donald Trump took office and the introduction of new customs duties.
- Not all experts are economically inclined towards the near future. Some people blame the economic crisis in European processing, especially Germany, which may result in fewer orders coming to Poland.
What about salaries?
Production growing faster than expected pleased those in power, although Poles' hearts (and pockets) are probably closer to other economic data, which was also published today (Monday, November 25) by the Central Statistical Office. The average salary increased by 10.2%. year on year and increased to the level PLN 8,316.57 gross. Some people wondered whether we would see the front nine again (with the dynamics), but ultimately the reading, in line with average expectations, remained double-digit. Salaries are rising in just such a way, at a double-digit pace for almost a year now – the last month with single-digit growth was December 2023.
In real terms, i.e. after taking into account inflation, the average salary increased by 5%. – experts calculate. They also point out that next year it will not be so good. Average wages will continue to increase, but at a slower pace. A smaller increase in the minimum wage will probably also contribute to this.
Employment decreased by 0.5%. and this has been a trend for many months now. This is primarily a reflection of the situation in industrial processing, where restructuring is taking place, resulting in layoffs in factories. In addition, retiring employees of such plants are not always replaced by new ones.
Data on average wages and employment concern only a part of the economy (approximately 40 percent of the labor market): firstly, companies, and secondly, those that employ at least 10 people.
Economists also see in the Central Statistical Office's wage report that Poles are less willing to spend money and more willing to save it. Perhaps it boosts growth prices energy.
Tuesday with sales
In this way, we smoothly move on to the data that is yet to come – and there is a lot of it this week. On Tuesday we will find out whether Poles are still tightening their belts in stores. Retail sales data for September were disastrous – they fell (in constant prices, i.e. adjusted for the effect of inflation) by 3%. year to year (and an increase was expected). The average of experts' expectations for October is a sales increase of 0.7%. Still not much, but consumer uncertainty is expected to weigh on wallets.
Unemployment Wednesday
On Wednesday, the Central Statistical Office will release the unemployment rate for October. According to forecasts, it will amount to 5%. – which is exactly the same as in September and it is still around the record low level. This is the specificity of the Polish (and also some countries in the region) labor market. It is virtually drained of potential employees, which causes certain tensions and can be a huge challenge in some industries.
Poland is the most vulnerable to labor shortages in the EU. We have the smallest untapped potential of the labor market in the European Union – according to Eurostat data for 2023. – In our country, 863 thousand people were not working, but would be ready to take up work under favorable circumstances. In 2009, this reservoir amounted to almost 2.5 million people, and in 2021 it slightly exceeded 1 million – Dr. Paula Kukołowicz, head of the sustainable development team at the Polish Economic Institute, recently told us. I wrote more about it in the text: In this ranking, Poland ranks first in Europe. But that's not entirely good.
Thursday with GDP
On Thursday, November 28, we will learn the details of GDP dynamics – that is, we will find out what drove our economy up and what drove it down in the third quarter of this year. The preliminary reading of the Central Statistical Office indicated that that year to year, our GDP increased by 2.7%, but quarter to quarter it already – unexpectedly – dropped. – We even put forward a thesis that the Polish economy cannot grow faster than 3% if Germany does not grow – Karol Pogorzelski, an economist at Pekao SA, commented to us at the time. We wrote about it here: The economy is slowing down, but why? “The pace of reconstruction is the slowest since the transformation”.
Inflation Friday
We will close the week with the first, so-called quick inflation reading for November. In October we saw it increase to 5%. (on an annual basis). Data for the current month are expected to show a slight slowdown and an increase in prices by 4.9%. year to year. With these preliminary data, we do not get a full table with a breakdown of price changes for individual categories of goods and services. The Central Statistical Office will only provide information about food, energy and fuels.
Sources: Central Statistical Office, economists' reports Pekao SA, PKO BP, ING, Crédit Agricole.