This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
Interactive chart Manufacturing alone, the largest component of industry, expanded by 9.1% year on year. The sector is thus making up for losses incurred during a cold winter, which had weighed on production.
March’s strong industrial performance was broad-based, with gains recorded across nearly all sectors. Of the 34 divisions tracked by Statistics Poland (GUS), output (measured at constant prices) increased in as many as 28. Particularly robust growth was seen in transport equipment manufacturing (up 19.5% year on year) and in machinery and equipment (13%).
The strongest momentum was recorded in segments that had suffered weaker demand over the previous two months due to the harsh winter. These included, first, industries supplying the construction sector – notably cement production (up 10.9% in March) and the manufacture of chemicals and chemical products (9.9%). Second, consumer-oriented industries also posted solid gains, including beverage production (up 12.9%).
Another factor that may have lifted demand is the war in Iran. Companies may have grown wary that higher energy prices would feed through into costs. Moreover, in an escalation scenario, supply chains could be disrupted and component shortages could emerge. Having learned from recent years, firms appear to have moved quickly to rebuild inventories.
March’s industrial figures look more like a positive anomaly than the start of a new trend. The catch-up after the winter lull should not last long. Meanwhile, the conflict in Iran has, for now, not escalated, which should curb further stockpiling. Industrial output will continue to expand – supported in particular by stronger demand from construction – but the pace of growth is likely to moderate.
Construction output revives
Activity in construction has not been as spectacular as in industry. Seasonally adjusted construction and assembly output fell by 2.1% year on year in March. Even so, this marks a clear improvement on January and February, when growth came in at -10.8% and -2.1%, respectively. On a month-on-month basis, output in March rose by 6.2%.
In March, activity across all construction segments expanded at a broadly similar pace. Unlike in industry, lost ground is harder to recoup in construction. This largely reflects the fact that industry typically operates with greater spare capacity, giving it more flexibility. In construction, such spare capacity is more limited. In addition, large-scale projects require the coordination of multiple processes, making any acceleration difficult.
The coming months should nonetheless bring a pickup in activity. This will be driven both by infrastructure investment – including projects still financed under the National Recovery Plan (KPO) – and by growth in residential construction. A key risk, however, lies in persistently high oil prices, which are feeding through into higher fuel and asphalt costs.
Wage growth hits a sweet spot
Interactive chart Statistics Poland also released fresh data on wages in the enterprise sector, which rose by 6.6% year on year in March. The average gross salary exceeded PLN 9,600 (approximately EUR 2,200). Since the start of the year, wage growth has held slightly above 6% - a “sweet spot,” one might say.
On the one hand, this pace is clearly above inflation. After stripping out March’s elevated price growth of 3%, real wages increased by 3.6%, pointing to a tangible rise in households’ purchasing power. On the other hand, the rate is not high enough to risk generating stronger inflationary pressure in the economy – especially given that these figures cover firms employing at least 10 people. Across the economy as a whole, wage growth is likely running somewhat below 6%.