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BIEC: economic climate down slightly in January


The Leading Indicator (WWK), which provides information on future trends in the economy, dipped by 0.7 points in January, the Bureau for Investments and Economic Cycles (BIEC) reported. According to the BIEC, there are indications that the current wave of the crisis in the world economy will be less severe but longer than the previous one five years ago.

Five components of the WWK deteriorated in January while three improved as compared with the preceding month. The biggest negative contributor was a decline in managers’ assessments of the financial performance of their companies and of the general economic outlook. The Bureau reckons we will see more cost-cutting measures in the business sector in the near future, including job cuts, smaller wage increases, reductions of inventories and asset disposals.

There was also a further decline in new manufacturing orders, though export orders stabilised. The industries that experienced particularly sharp drops in orders during the past month are clothing and chemicals. At the same time, in the automotive industry the decline bottomed out, while the food sector saw a small increase in orders.

Labour productivity in the enterprise sector decreased slightly compared with December.

Money supply (M3) has remained broadly unchanged in real terms since October, with household and business deposits under pressure.

At the same time, consumer debt remains on the downward path that it entered back in May 2012, and is now well below its peak of September 2011. According to the Bureau, despite interest rate cuts there is little to suggest the credit boom will return anytime soon.

Meanwhile, the Warsaw Stock Exchange continues to defy economic concerns, with its main WIG index up for the seventh consecutive month.

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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