Poland's Manufacturing PMI Drops in December, but Optimism Persists for 2025

Poland's manufacturing sector experienced a decline in December, with the Purchasing Managers' Index (PMI) dropping to 48.2 from 48.9 in November. This marked the strongest deterioration since August, according to S&P Global. Despite the contraction, there were signs of potential recovery, as new orders contracted at the slowest pace in more than a year. The downturn was driven by steeper declines in output and stocks of purchases, despite a sustained rise in employment and a slower decline in new orders.

Domestic demand showed signs of recovery, although exports remained weak, particularly to Germany. New export orders fell at the fastest rate in three months, indicating a significant decline in export demand from Germany. This weakness in exports to Germany is likely due to the economic slowdown in the Eurozone, which has had a negative impact on demand for Polish manufactured goods.

The decline in output and stocks of purchases significantly contributed to the fall in Poland's manufacturing PMI in December. According to S&P Global, the output index fell at the steepest rate since August, indicating a significant contraction in manufacturing activity. This was driven by a decrease in demand, particularly from Germany, as new export orders fell at the fastest rate in three months. Additionally, the index for stocks of purchases also decreased, suggesting that businesses were not replenishing their inventories at the same rate as they were using them, further contributing to the overall decline in the PMI.

Despite the contraction in output, which fell at the steepest rate since August, firms are optimistic about 2025, expecting economic recovery, export growth, and new client acquisitions. Employment in the manufacturing sector grew for the third consecutive month, albeit at a slower pace than in November. This combination of factors helped to offset the steeper declines in output and stocks of purchases, contributing to a less severe overall PMI drop.

Price pressures remained weak, with input prices falling for the seventh time in 2024, and output prices also declining. The PMI trended at 48.8 over the fourth quarter, the highest quarterly average since early 2022, and Poland outperformed the euro zone, which averaged 48.3.

In conclusion, while Poland's manufacturing PMI dropped in December, there are signs of potential recovery, and firms remain optimistic about the future. The decline in output and stocks of purchases contributed to the fall in the PMI, but the slower decline in new orders and sustained rise in employment helped to mitigate the overall drop. Despite weak exports to Germany, domestic demand showed signs of recovery, and price pressures remained weak. As we look ahead to 2025, investors should keep an eye on Poland's manufacturing sector, as it may present opportunities for growth and investment.