On a month-on-month basis, production decreased by 0.1% after two months of growth. This confirms that the performance of economic indicators, for example the PMIs, of both Poland and Germany are improving, but remain at low levels.
Once again, the largest annual declines were recorded in export-related industries, such as electrical equipment manufacturing (16.6% year-on-year), computers, and electronic and optical products (13.0% year-on-year). In contrast, increases were recorded in areas related to domestic demand such as clothing manufacturing (19.1% year-on-year) and pharmaceutical products (13.5% year-on-year), among others. Production is also growing strongly in areas related to investment and energy, such as the repair, maintenance and installation of machinery and equipment (19.6% year-on-year). We also saw strong growth in the generation and supply of electricity, gas, steam and hot water (17.2% year-on-year). This suggests we should continue to see increased investment and a deepening of the export decline in the GDP structure in early 4Q23.
The general picture of manufacturing data in recent months points to a slow improvement, although for the moment it is mainly in industries linked to domestic demand. Improving economic indicators in the country and in Poland’s main trading partners suggest that the worst is over for the industry and that a further improvement in activity will be seen at the beginning of the year.
In contrast, the decline in PPI inflation in October accelerated to 4.1% from 2.7% year-on-year in September (after revision). This is mainly due to the elevated 2022 baseline, but we also saw a drop in monthly terms. Compared to September, prices fell more sharply in the manufacturing and processing section of coke and refined petroleum products, along with global energy raw material prices and a stronger zloty. However, there were month-on-month declines in most manufacturing segments. We believe that the coming months will be marked by further deflation of production prices.