In January, apart from fundamental factors (demand), the data on the Polish economy were also influenced by more technical ones: unfavorable working days arrangement (a drop from +1 to -2 y/y) and effects related to the turn of the year (in the industry, a reaction after the holiday-rich December, in construction large seasonal variability of monthly growth rates and the impact of weather). Both generated a lot of uncertainty, but their impact ultimately turned out to be smaller than our expectations. We view the January data as decent, but they do not affect our view of the economic growth path this year. Let’s take a closer look at the data published today.

The level of industrial and construction output (s.a., Feb'20 = 100%)

Source: Statistics Poland, Macrobond, Pekao Research

Industrial production shrank by 1% yoy, and after excluding seasonal and calendar factors, it rose by 0.5% mom. Thus, the level of industrial production is equal to that of November, and the broader picture – the long-term stagnation of the industry – remains unchanged. However, it is worth noting that the overall growth of industrial production in January as significantly (by 1 percentage point relative to our baseline) lowered by weak energy production. Perhaps this is due to relatively high temperatures, but here the correlation looks better on paper than in actual data, perhaps it's just a fluke: energy production has been characterized by increased volatility since 2021 and has had a greater impact on the entire index. As for manufacturing itself, we must note a significant acceleration in industries related to construction and investment activity: metals and metal products, cement and other non-metallic mineral products, other transport equipment (trains!). A similar signal is not visible in export industries, which makes us think of the current phase of recovery in the Polish economy as still driven by domestic demand.

Industrial output growth at detailed level (yoy)

Source: Statistics Poland, Macrobond, Pekao Research

In a commentary a month ago, we listed four reasons for the weakness of the Polish industry:

1. The near-stagnation of major trading partners.
2. Sectoral problems (e.g. automotive).
3. The savings mode of Polish consumers, reducing demand for durable goods.
4. Investment pause in 2024.

So far, we can check off one and a half point from the above list: investment is starting to move up, among problematic sectors the energy-intensive chemical industry is looking better (however, the aforementioned automotive still posts double-digit declines in production). We think that in 2025 we will check off another one and a half (rest of sectoral problems and exports).

The swing in the dynamics of construction production (roughly from -8 to +4% yoy) is mainly a matter of the low base from the previous year. On a monthly basis, the sector's production did not change compared to December. A glance at the production level (see the chart at the beginning of the commentary) shows that the recovery started at the end of last year but base effects masked it until the turn of the year. What’s next? For some time now, we have been optimistic about the prospects for investments in Poland. We expect them to grow by an average of 8.6% this year (which means that the growth rates of construction output will soon be in double digits) and will continue to grow in the second half of this decade. Paraphrasing a classic, it is not the beginning of the end of the recovery, but the end of the beginning. It is worth noting that this is happening without any input from many segments of construction. One of them is residential construction, which is still slowing down as shown by the January data (see chart below).

Activity in residential construction (yoy)

Source: Statistics Poland, Macrobond, Pekao Research