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BIEC: economic climate sours in September


The Leading Indicator (WWK), which provides information on future trends in the economy, shed more than two points in September, the Bureau for Investments and Economic Cycles (BIEC) reported. It was its biggest monthly decline since February 2009. According to the Bureau, global concerns about a second wave of the downturn and continued uncertainty about the debt crisis in the eurozone are having an increasing impact on the Polish economy. To compound the situation, high inflation and sluggish job creation at home are putting a damper on consumption, while fast growth in producer prices is hurting investment plans.

Of the eight component indicators of the WWK, four deteriorated compared with August, three improved and one remained unchanged. The biggest negative contributor was anxiety on world equity markets, including in Warsaw, where the main index lost 15% in August. There was also a major slowdown in household debt, which does not bode well for consumption. Most worrying, however, is that the slack in new manufacturing orders observed since the beginning of the year deepened further in September, affecting both domestic and export orders and applying across various sectors from food to investment goods. Managers’ assessments of the general domestic economic situation also deteriorated, as did perceptions of the condition of their company (but by a much smaller margin). Meanwhile, companies continued to seek cost savings by reducing inventories, but the high rate of producer inflation shows their room for manoeuvre is limited. And the improvement in productivity observed in September was only slight, and can hardly be read as a turning point after more than a year of efficiency losses.

The WWK is a prognostic instrument. It is a measure of the current state of economic activity and provides advanced information on upturns and downturns in economic activity in relation to GDP as well as data on production, retail sales, wages and household incomes. The average prognostic timeframe of the WWK index in relation to the actual state of economic affairs ranges from 3 to 12 months, depending on the phase of the economic cycle.

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