Surprise drop in industrial output casts shadow on Poland's 2024 growth

Industrial output drop: Poland experienced an unexpected slump in industrial output during March, sparking concerns about the country's economic recovery in 2024. The Ministry of Finance had projected a growth rate of 3 per cent or higher for the year, driven by a resurgence in core markets such as Germany and a boost in domestic consumption fuelled by robust wage growth.

However, industrial production in Poland took a sharp downturn, plunging by 6.0 per cent YoY in March, a figure significantly below the anticipated 2 per cent drop forecasted by analysts. This decline, the second-largest since the onset of the COVID-19 pandemic, follows two months of growth earlier in the year.

Grzegorz Maliszewski, the chief economist at Bank Millennium, expressed concern over the severity of the decline but advised against immediate adjustments to forecasts. He pointed out that other monthly data did not exhibit a similar trend, suggesting it might be premature to conclude a reversal in direction.

Economic recovery outlook

Despite the disappointing March figures potentially impacting first-quarter GDP growth, likely falling short of the forecasted 2.3 per cent, Maliszewski remained optimistic about the ongoing economic recovery. He highlighted the anticipated increase in domestic demand and improving economic conditions in Germany as supportive factors.

While the decline in industrial output raised eyebrows, analysts from ING Bank Slaski remained hopeful, suggesting it could be an isolated anomaly. They pointed to the gradual recovery in global industry and domestic demand, boosted by notable wage growth, as factors supporting this optimism.

In other economic indicators released on Monday, corporate sector wages in Poland rose by the expected 12.0 per cent in March. However, employment saw a slight decrease of 0.2 per cent, slightly below analysts' expectations of a 0.1 per cent drop.

(With Reuters Inputs)