The Forward Looking Indicator (Wskaźnik Wyprzedzający Koniunktury – WWK), which provides advance information on future trends in the economy, rose by 0.3 points in January 2024, its sixth consecutive month of improvement. The scale of the latest increase was the weakest to date. The pattern of changes in the individual components of the index suggests the demand-led nature of the expected recovery, as evidenced by a recovery in consumer credit and an increase in household deposits, with very weak data on industrial new order inflows and no improvement in corporate finances. Such imbalances threaten a renewed rebound in inflation.
January data from the CSO’s business climate survey brought a significant deterioration in the rate of inflow of new orders in the manufacturing business sector. This applied equally to orders from domestic and foreign customers. Nearly 30% of the companies surveyed are currently experiencing a decline in orders. A slight improvement in orders to domestic customers took place in December last year and was most likely seasonal in nature, related to increased demand around Christmas.
At the end of last year, companies reduced stocks of finished goods in their warehouses, adjusting their levels to slightly weaker demand and reduced production volumes. Currently, more than 80% of companies believe that their stock levels are in line with the scale of demand, but this does not mean that stocks will not be reduced further if the weakening pace of new orders continues.
Businesses continue to assess that the state of finances in their companies is deteriorating (nearly 22% of respondents). Managers’ expectations of the financial situation over the next few months have improved slightly compared to the survey conducted a month ago. They are probably hoping for a recovery on the demand side, a stabilisation of business costs and at least a simplification of the tax system.
The M3 money supply in real terms accelerated last December. There was a marked increase in household credit debt and the value of Poles’ savings accumulated in the form of bank deposits. These data are indicative of accumulating demand, which may soon translate into a rebound in inflation, or at least a significant slowdown in its rate of decline.
Source: BIEC
