Softer Polish industry underscore risks to GDP growth outlook
The desk views the recent data from Poland as a critical indicator of potential economic fragility, underscoring a cautious stance towards GDP growth forecasts. Despite a robust second-quarter GDP growth of 3.9% YoY, August's industrial output growth lagged expectations significantly at just 4.3% YoY compared to estimates of 8.3% from **ING** and 6.1% consensus, highlighting underlying vulnerabilities in the economy. Per the full note , the desk is aligned with the cautious sentiment, forecasting the GDP growth rate to moderate to 3.4% this year given the continued challenges from industrial production and the ongoing energy crisis.
What the desk is arguing
The desk interprets the softer industrial output in Poland as a clear signal of economic risks that might jeopardize the GDP growth outlook. This is further underscored by a disappointing manufacturing growth rate of only 3.4% YoY, down from 4.2% previously, as noted in the source commentary. The recent data suggests that despite some sectors showing promise, such as energy production, the overall industrial activity is not keeping pace with previous expectations.
The dip in industrial production raises flags about consumer and business confidence ahead of a challenging economic landscape. The month-on-month decline of 1.2% in industrial output suggests potential stagnation, which could further exacerbate growth concerns. As indicated, the various subsector performances show that while some categories, particularly machinery, are expanding, the reduction in durable consumer goods production (down 7.0% YoY) indicates vulnerabilities within consumer demand.
Where it sits in our coverage
Our consensus target for the Polish Zloty (PLN) against the Euro (EUR) is 1.075, with a range from a low of 1.04 to a high of 1.12. Specifically, we see forecasts from the following firms: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
There is a divergence between our cautious approach and some more optimistic forecasts out there, but currently, our view is relatively bearish, sitting towards the lower half of the forecasted range, indicating a potential increase in volatility in the PLN as market participants reassess their positions.
How other firms see it
Currently, firms like jpmorgan and others reflect a bearish view on the PLN, emphasizing the risks highlighted by the recent economic data. In contrast, bofa provides a more cautious outlook, suggesting a the need to watch for further indicators that might confirm these initial concerns.
Keep an eye on the EUR/PLN trajectory as sentiment towards the Eurozone economy evolves, particularly in the light of upcoming ECB decisions which may weigh on the Zloty through shifts in aversion towards risk assets. The connection between Polish output and Eurozone economic conditions remains a critical determining factor for PLN's performance.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Poland's August industrial output growth fell short of expectations, sparking concern about GDP growth.
- 02The desk aligns with a conservative forecast of 3.4% GDP growth for 2023 amid ongoing energy crises.
- 03Industrial production showed a month-on-month decline, highlighting potential stagnation risks in the economy.
- 04Subsector performances indicate a mixed picture, with positive growth in certain industries but declines in consumer goods.
Market implications
Traders should monitor the PLN closely, especially as it approaches the lower range target of 1.04. We anticipate potential volatility in response to industrial production data releases and broader economic indicators, particularly as Poland navigates its ongoing energy challenges.
Risks to this view
An unexpected surge in industrial output or a significant turnaround in consumer demand could invalidate the cautious outlook, potentially driving up GDP growth estimates and strengthening the PLN. Additionally, geopolitical stability could play a pivotal role in shaping market sentiment moving forward.
Articles Softer Polish industry underscore risks to GDP growth outlook Published 10:34 Poland Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Despite the conflict in the Middle East, Poland's second-quarter GDP growth was buoyant at 3.9% YoY – but softer-than-expected August industrial output data, alongside the prolonged energy crisis, calls for caution on the economic outlook for the coming quarters. We're sticking to our conservative forecast of GDP growth at 3.4% this year Rafal Benecki , Adam Antoniak and Leszek Kasek Softer industrial data for August has only increased our caution surrounding Poland's economic outlook Industrial output short of expectations in August Poland’s industrial output increased by 4.3% year-on-year in August (ING: 8.3%; consensus: 6.1%), following growth of 4.8% YoY in July (revised down from 5.1% YoY). Given a favourable calendar effect in the form of one additional working day compared with a year earlier and a low statistical base from last year, the result is disappointing.
Growth in manufacturing output slowed to 3.4% YoY from 4.2% YoY a month earlier. Energy production continued to expand at a double-digit pace (10.5% YoY), as did mining output (18.7% YoY). Seasonally adjusted data points to a 1.2% month-on-month decline in industrial production, following two months of flat monthly readings.
Industrial production down in August Industrial production MoM (SA) Source: GUS, ING. "> Source: GUS, ING. Growth in August was driven mainly by the production of intermediate goods (8.5% YoY), non-durable consumer goods (4.8% YoY) and capital goods (4.7% YoY). In contrast, output of durable consumer goods and energy-related products declined (down by 7.0% YoY and 0.5% YoY, respectively).
Production increased in 25 out of 34 subsectors in August. The strongest gains were recorded in electrical equipment manufacturing (18.7% YoY) as well as machinery and equipment production (12.8% YoY), reflecting the advanced stage of the investment cycle co-financed by the National Recovery Plan (NRP). The largest declines were in the production of tobacco products (-11.7% YoY), textiles (-4.9% YoY), furniture (-2.3% YoY) and motor vehicles (-1.5% YoY), all of which are particularly exposed to competition from China.
Recently, China has become Poland’s largest importer, ahead of Germany. Producer price inflation increased Producer prices (PPI) increased by 4.2% YoY in August (ING: 4.1%; consensus: 3.6%), following growth of 3.1% YoY in July (revised up from 2.8% YoY). The marked acceleration in producer price inflation was largely due to a base effect from August last year, when the PPI index fell by 0.5% MoM, compared with a 0.6% MoM increase this year.
Prices in the petroleum refining sector rose strongly for another consecutive month, reflecting higher crude oil prices on global markets. Energy crisis pushing PPI higher PPI, December 2021=100 Source: GUS, ING. "> Source: GUS, ING. Stronger investment and softer consumption seen in 2H26 August data suggests that, despite Poland's surprisingly strong economic performance in 2Q26 (with GDP growth of 3.9% YoY), the outlook for the second half of the year warrants caution.
In particular, slowing wage growth and elevated fuel prices could weigh on household consumption growth, which already decelerated in 2Q. At the same time, the investment cycle supported by NRP funds is peaking and generating multiplier effects across the economy, and this could already be seen in 2Q26 corporate investment data. While we see scope for GDP growth to exceed our current 3.4% forecast for 2026, geopolitical uncertainty and the protracted energy crisis prevent us from revising that forecast upwards.
Industrial propduction GDP Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Rafal Benecki Chief Economist, Poland Rafal Benecki is a Chief Economist at ING in Poland, joining in 2005.
Prior to this, he was the head of the Economic Analysis Bureau at Millennium Bank in Warsaw. He has an MSc in Financial… Adam Antoniak Senior Economist, Poland Adam has about 20 years of experience in macroeconomic research. He has worked for leading financial institutions in Poland (Bank Pekao, Bank BPH), and members of international financial groups… Leszek Kasek Senior Economist, Poland Leszek Kąsek is a Senior Economist in the economic research team at ING Bank Śląski in Warsaw, responsible for sustainability, energy transition, and green finance in Poland.
He… In this article Industrial output short of expectations in August Producer price inflation increased Stronger investment and softer consumption seen in 2H26
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