Poland’s industrial production contracted 2% year on year at constant prices in February (chart), after a revised fall of 0.9% y/y the preceding month, unadjusted data from the statistical office GUS showed on March 20.

The contraction came as major surprise, defying expectations of a wider recovery hinted at by the recent PMI reading. Negative calendar effect was also a factor, although only secondary.

“A recovery is visible in the global industry, but not in Germany or the Central and Eastern European region. The beginning of the year does not show a continuation of the recovery seen at the end of 2024 and in January,” ING said.

“In this cycle, growth is expected to rely on domestic demand, particularly consumption and public investment. However, with exports remaining weak, the cyclical rebound of Poland’s industrial sector is likely to be slow,” ING also said

Seasonally adjusted data show that output increased 0.1% y/y in February, following a gain of 0.3% y/y the preceding month.

In unadjusted monthly terms, industrial production contracted 0.4% in February after a revised expansion of 2.5% month on month in January, GUS also said. Seasonally adjusted, output declined 0.2% m/m after adding 0.5% m/m the preceding month. 

Broken down by the main segments and in unadjusted terms, output decreased 2.3% y/y in February in manufacturing following a revised fall of -0.7% y/y in January. 

Output in the utility sector jumped 8.1% y/y in February after a revised fall of -3.5% y/y the preceding month. 

In water supply and waste management, production also eased expansion to 1.5% y/y in February after adding a revised 2.9% y/y in January.

Production declined 12.9% y/y in mining and quarrying in February, after falling a revised 5.1% y/y in January, GUS data also showed.

Overall, production expanded in 20 of 34 industrial segments in February in y/y terms, the same ratio as in the preceding month.

The new data does not alter the outlook for monetary policy, analysts say. Expected economic recovery and still elevated wage pressures support the scenario of stable interest rates in the coming months.

The NBP cut its reference interest rate by a combined 100bp to 5.75% in September and October 2023. The central bank is expected to begin monetary easing in mid-2025 at the earliest.