The latest Forward Looking Indicator (WWK), which forecasts future economic trends, edged up by a mere 0.2 points in July, failing to offset last month’s losses. This minor uptick is part of a broader pattern of minimal, alternating changes observed since the start of the year, signaling a drift towards economic stagnation with no clear signs of recovery.
Consumer behavior remains erratic, investment has been in a multi-year slump, and the economic data from neighboring countries offers little hope for improvement.
Out of the eight components of the WWK, two showed slight improvement, one worsened, and the remaining five stayed unchanged from the previous month. The most concerning aspect is the declining inflow of new orders to the manufacturing sector, which has been shrinking since the beginning of the year. Although there was a slight improvement in July, this was mainly due to domestic market orders and seasonal demand increases. Meanwhile, orders from foreign customers continue to decline, primarily due to the weak economic conditions in many European Union countries, especially Germany. Consequently, industries such as furniture, leather, automotive, and metal are suffering the most.
However, the weak economic situation in neighboring countries is not the sole factor affecting the decline in orders. Many companies have lost their competitiveness in international markets due to rising labor and energy costs. Profitability has been decreasing as operating costs rise, pushing many companies to the brink. Unable to further cut costs, businesses are increasingly passing these costs onto customers, leading to price hikes. The Central Statistical Office’s (GUS) business climate surveys indicate that many companies are adopting this strategy, with a growing percentage of managers planning price increases in the coming months.
The financial situation of companies continues to deteriorate, exacerbated by rising costs. In the GUS’s July survey, nearly 84% of companies cited rising energy and fuel prices, and 77% pointed to rising employment costs as the main reasons for their increased expenses. Labor productivity in the manufacturing sector has not improved for over two years and has been declining since the beginning of this year.
Moreover, the optimistic sentiment on the Warsaw Stock Exchange has vanished, with the real value of the WIG index falling by more than 2% in July.
Source: BIEC
