Industrial production declined by 0.1% year-on-year in June, following a 3.9% increase in May and falling well short of both our forecast and the market consensus, which had anticipated growth of around 1.6% yoy. While a slowdown in the pace of industrial output was broadly expected by analysts—mainly due to an unfavorable calendar effect (0 additional working days yoy in June versus +1 yoy in May)—the magnitude of the downturn was unexpected. This raises questions about the narrative of the domestic industrial sector breaking free from years of stagnation. That said, it would be premature to dismiss several months of solid performance on the basis of a single weak reading. A more granular analysis of the data should help us to assess whether there are any real causes for concern regarding the sector’s underlying condition.

First, manufacturing output rose by 0.4% yoy, which is one of the more encouraging aspects of the reading. Second, while slower growth was observed across nearly all subsectors of manufacturing—largely due to the negative calendar effect—the most structurally important categories from the standpoint of a sustainable recovery, particularly export-oriented industries (e.g., furniture, automotive, machinery), continued to exhibit solid positive growth rates. This segment forms the backbone of domestic industrial strength, and in that context, we see no immediate cause for alarm—quite the opposite, in fact. Third, the headline figure was significantly dragged down by declines in energy production and mining. Although these categories represent a relatively small share of total industrial output, their inherent volatility tends to distort the aggregate reading.

Industrial output (February 2020 = 100%, seasonally adjusted)

Source: Statistics Poland, Macrobond, Pekao Research

The strong second quarter of 2025 thus concludes on a weaker note, with a seasonally adjusted month-on-month decline of 0.5%, effectively extending the period of stagnation in the domestic industrial sector. As we have consistently emphasized, the only viable path toward a sustained industrial rebound lies in the revival of external demand—most critically, a recovery in economic activity within the euro area. While both sentiment indicators and hard data suggest that such a recovery is gradually materializing, its transmission to Poland’s manufacturing sector remains modest for now. Nonetheless, we maintain our view that continued improvement in euro area economic condition will translate into progressively better performance for domestic industry, with negative annual growth rates becoming history.

In conclusion, we interpret today’s reading as a temporary setback. The outlook for the coming months and quarters remains constructive, supported by strengthening external demand and inflows from the EU Recovery and Resilience Facility (KPO).