As Industry Gains Traction, Construction Struggles to Rebound
Industrial production rose by 0.7% yoy in August, broadly in line with expectations (our forecast: 0.2%; market consensus: 1.0%). After adjusting for seasonality, this translates to a 1.5% yoy increase. In contrast, construction output disappointed, declining by nearly 7% yoy in the same month. While the weakness in residential construction is unsurprising given elevated interest rates, the continued stagnation in infrastructure investment remains more difficult to explain. We still expect improvement in this regard.
The inflow of funds from the National EU Recovery and Resilience Plan (KPO) is, for now, much more visible in industrial production than in construction and assembly. This is particularly true for train manufacturing, which in the GUS statistics falls under 'other transport equipment'. In fact, railway operators have placed substantial orders in this area, and production is in full swing. The machinery industry is also showing strong growth, especially when including repairs, maintenance, and installation. This aligns with the observed increase in corporate investment outlays this year and contrasts with the negative contribution of investments to GDP in Q2 2025 (we think that the latter statistic will be revised upwards). Furniture production delivered a positive surprise, managing to return to growth in August after many months of decline. The automotive industry, however, was not as fortunate and saw another consecutive month of declining output. Overall, though, the manufacturing sector continued a moderate recovery in August
The growth of production in the main manufacturing sectors, % yoy in August
Source: StatOffice, Pekao Research
As previously mentioned, construction and assembly production delivered a negative surprise in August. The weak result was undoubtedly influenced by one fewer working day compared to last year, but that alone doesn’t explain such a low reading: -6.9% yoy. Negative growth rates in this sector have been with us for the second year now, due to high interest rates stifling residential construction and the EU funding cycle, which hit a low point last year. This year, however, we should already be seeing growth in infrastructure investment and a recovery in specialist construction and civil engineering. We know this from the record-high railway tenders awarded last year, as well as ambitious investment plans in the energy sector (offshore wind farms are already being installed). However, these investments are picking up exceptionally slowly, and we still have to wait for them to start showing up in construction and assembly production statistics
Construction output, 12-month rolling sum in PLN bn
Source: StatOffice, Pekao Research
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