Industrial activity (end-2019 = 100%, s.a.)

Source: GUS, Macrobond, Pekao Research

May’s industrial production figure is decent, but this positive surprise was driven by certain factors that we might describe as not indicative of the overall health of the industry. 

• Mining, having grown by 32.6% yoy, posted its best result in the history of the series in May. Normally, we wouldn’t focus on this sector, but its contribution to total industrial production has risen from zero to 1.2 percentage points in just a few months, so mining deserves a brief comment. This growth is partly due to significant increases in hard coal and lignite extraction, as well as increases in silver production, but the missing piece must be rock, sand & aggregates used for construction. Statistics Poland (GUS) does not report growth rates for this segment of mining, but a simple calculation indicates that production growth there must have been in the order of 40% yoy. 
• Production growth in manufacturing was close to our forecasts (+2.5% yoy), but what stands out here is the growth rate of other transportation equipment, which exceeded 60% yoy in May. The acceleration in this sector contributed an additional 1.2–1.3 percentage points to industrial production. 

We deliberately do not characterize these factors as temporary or one-off, as we are seeing a continuation of trends that were already identifiable in the data. The only surprise is the scale. 

Production of other transport equipment (% yoy)

Source: GUS, Macrobond, Pekao Research

What does May’s industrial production tell us about the state of the Polish economy? 

1. Polish industry as a whole is not slowing down, and the impact of the war in the Persian Gulf on its condition is limited to subtle supply-side effects. Prices have risen, deliveries have been delayed, and some industries have experienced shortages of raw materials and components, but on a scale incomparable to that of 2021–22. 
2. Foreign demand and domestic consumer demand remain in a sideways trend – for some sectors, May was a weak month (food production, automotive), while for others it was quite good (electrical equipment). The momentum in the domestic chemical industry, which had been revitalized by the Gulf War, has faded. 
3. What do rock mining, cement production, glass manufacturing, steel production, and train manufacturing have in common? Investment. We’ve had a very strong May, capping off a series of strong months. The internal drivers of growth, which we’ve written about previously, are running at full speed. 

Industrial output by demand source (% yoy, MA3)

Source: GUS, Macrobond, Pekao Research

To sum up, the May industrial production data are more interesting for the structure of production growth than for the overall figure itself. They provide indirect evidence of the anticipated and forecasted acceleration in investment, while also suggesting that economic growth will not fall below a certain threshold in the near future. We feel quite comfortable with our forecast of 3.5% GDP growth this year.