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BIEC: economic climate brightens in December


The Leading Indicator (WWK), which provides information on future trends in the economy, gained 2.7 points in December, more than reversing its decline from the preceding month, the Bureau for Investments and Economic Cycles (BIEC) reported. According to the BIEC, the WWK’s drop in November was a one-off caused by a particularly sharp but temporary deterioration in manufacturing orders. In December, by contrast, orders improved markedly, and the index has now returned to its long-term trend indicating a gradual economic slowdown.

Six components of the WWK improved in December and two deteriorated as compared with the preceding month.

The biggest positive contributor was an improvement in new manufacturing orders, with three sectors, namely furniture, pharmaceuticals and other transport equipment, reporting substantial increases, particularly in export orders. The food and textiles sectors also saw modest increases that cannot be explained only by seasonal factors. On the other hand, in heavy industries and in the machinery sector orders remained weak, reflecting a slump in capital investment. But while the proportion of companies reporting decreasing orders still outnumbers those with growing order books by about 10 points, the reversal is a significant development, the Bureau notes.

As orders improved, inventories of finished goods declined in December, which should support output in the months ahead.

Companies’ views about the domestic economy also became more positive than they were in November, with the difference of pessimists over pessimists reduced by half. And assessments of the financial condition of own company improved for the second month running.

There was also a slight increase in labour productivity in the manufacturing sector. And the Warsaw stock market rose for the sixth consecutive month.

At the same time, money supply (M3) contracted in real terms, as household and business deposits decreased; and household debt continued on its downward trend.

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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