Disappointing end to 2024 in Polish industry
Polish industry disappointed again, having grown by a mere 0.2% yoy in December. In hindsight, the October spike in industrial output indeed was too good to be true. Looking ahead, most of the drags on Polish industry will fade in 2025.
According to the recently published data, industrial production barely grew in December – the result for this month is +0.2% yoy, significantly below the consensus (2.3% yoy) and our somewhat more optimistic forecast (2.7% yoy). In our opinion, the weakness of the domestic industry, which can mostly be traced back to stagnation in demand from Western Europe, was compounded by an unfavorable calendar. In the coming months, the industry should look better.
Manufacturing output and sentiment
Source: Statistics Poland, Macrobond, Pekao Research
The main factor ensuring the return of industrial production to positive territory was supposed to be a greater number of working days compared to the previous year. This element of the forecasts indeed materialized, but the problem was their distribution. In December 2024, one only needed to take 3 days off to enjoy a nine-day break – Christmas fell perfectly in the middle of the week. Why wasn't this factor taken into account by forecasters? Because it didn't always work – December 2019 and 2013 looked the same, as did December 2012 (mostly). However, their impact and direction of surprises in production were different. Perhaps, therefore, the impact of long holidays on activity depends on the state of the economy. However, this is a side issue – if the calendar indeed reduced industrial production, it will be made up in the following month(s).
Industrial production, volume index
Source: Statistics Poland, Macrobond, Pekao Research
The main problem for Polish industry remains insufficient demand, which has resulted in years of stagnation in industrial production. In practice, industrial production in Poland has not changed since the end of 2021, and the somewhat puzzling spike in October, which received much attention and coverage, turned out to be ephemeral. The level of production last December is only slightly higher than in September 2024. Where does the insufficient demand in the industry come from?
- Near-stagnation of main trading partners.
- Sectoral problems (automotive).
- Polish consumers' savings mode, reducing demand for durable goods.
- Investment pause in 2024.
We can paradoxically notice that with so many negative factors, the Polish industry is doing quite well, because in neighboring countries the level of production is generally no higher than the pre-pandemic peak. In Poland, meanwhile, it is about 20% higher.
Looking ahead, 2025 promises to be more favorable from the perspective of Polish industry. Most of the aforementioned factors should fade: investments will rebound, there will be a recovery in European demand, and sectoral problems will be less severe. Polish consumers will cease saving excessively, but current income will not allow for a rebound in demand. In 2025, the Polish economy should grow by 4% after growing by 2.8-2.9% in 2024 (today’s data shifts the balance of risks towards the slightly lower number).
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