Key index gives early warning Polish industry to be hit by slowdown

A survey of those responsible for purchasing in manufacturing companies, covering new orders, output, employment, suppliers’ delivery times and stocks of purchases indicates the sector heading for a slowdown.

“Output, new orders and exports all contracted at the strongest rates in over ten years,” according to the publishers of the PMI survey, IHS Markit on Monday. The analysts also suggested that manufacturers were cutting their prices for the first time in three years, as pressure on their supply and labour costs eased.

While a reading of 50 points in the PMI index scale is seen as neutral, the October reading of 45.6 showed an increase in pessimism in Poland’s industrial sector. This is the twelfth drop in a row and the fifteenth month in a row that export orders have dropped.

Meanwhile, the PMI for Europe as a whole rose slightly from 45.7 in September to 45.9 in October.

Asked why order books were lighter in previous periods, the surveyed firms pointed to competition from China and weak European demand.

The PMI reading has been low for the past 12 months, despite the actual statistics for growth showing a more positive picture. This paradox continued in September, when industrial orders rose by 12.6 percent on an annual basis, according to Statistics Poland.

The overall outlook may not be as gloomy as the October PMI suggests. In a note following a tour of twenty US towns, ING Chief Economist Rafał Benecki wrote that fears that there will be an increase in the depth of the slowdown in world markets may have been overstated. “President Trump may abandon the December tariffs round”, while the events in the UK may lead to “mitigating risk of a hard Brexit.

As Poland’s economy is very well integrated with the global supply chain, the knock-on effect of any fillip to the global economy will be good news for Poland and other emerging markets.