The Leading Business Climate Index (WWK), informing in advance about future trends in the economy in August 2021, fell by 1.1 points compared to the previous month’s value. This is the first decline in the index since the beginning of the year.
The first signs of a contraction in domestic demand, which until now has been the main factor supporting economic growth, are appearing.
Of the eight components of the index in August this year. three increased compared to the previous month, one did not change significantly, and four worsened.
As a month ago, the most worrying is information from managers of manufacturing companies about the pace of the inflow of new orders. In July and August this year. it has been reduced compared to the situation in the first half of this year. While in July this year. Mainly export orders were reduced, while in August the decrease also applied to orders for the domestic market. The largest drops in orders were recorded in the group of enterprises producing durable consumer goods and food products.
At the same time, the stocks of finished products stored in enterprises have been increasing for two months. It is too early to talk about excessive stocks in relation to demand. Their growth is probably influenced by the current policy of company managers, who, in the conditions of difficulties with the supply of raw materials and other components necessary for production, which have been persistent since the beginning of the year, immediately process each batch of them obtained to guarantee the fulfillment of concluded contracts. The increase in stored goods is also seasonal, resulting from holidays and a slightly lower scale of production in the summer months. However, the two-month decline in orders may also be a sign of shrinking demand, and its main reason is high and rising inflation.
The surveyed entrepreneurs indicate a slightly worse financial situation in the companies they manage than a month ago. For almost a year, the financial condition of enterprises has definitely improved. This is confirmed by the quarterly data of the Central Statistical Office on revenues and costs, which show that the first two quarters of this year. – it is a dynamic recovery of losses caused by a pandemic. However, entrepreneurs suffer from a drastic increase in costs. Average annual increase in producer prices (PPI) in July this year. exceeded 8%, which has an impact on the financial results. The prices of raw materials, labor costs, energy prices as well as taxes and levies imposed on entrepreneurs are rising.
In this situation, it is not surprising that there is no equally dynamic improvement in the sentiment of entrepreneurs regarding the general condition of the economy. The percentage of optimists (entrepreneurs assessing that there has been an improvement) for several months has been equal to the percentage of pessimists (believing that the situation is going in the wrong direction).
Source: Leading Business Climate Index (WWK)
