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Further deterioration of economic conditions in Q1, but next quarter likely to be better


In Q1 2013 the IRG SGH barometer of business conditions decreased in both yearly and quarterly terms. Amid a seasonal slowdown of activity, the negative impact of cyclical factors was less than three months earlier. This suggests that in the second quarter conditions could slightly improve.

The synthetic assessment of the economy was prepared with the use of the barometer published by the Research Institute for Economic Development of the Warsaw School of Economics (IRG SGH). This barometer consists of business indicators for seven areas covered by the survey questionnaire: manufacturing, construction, trade, households, agriculture, the banking sector and transportation. The business survey in transportation was carried out by the Motor Transport Institute.
As of January 2013 the IRG SGH switched its formula for measuring conditions in the manufacturing sector to the one recommended by the European Commission. As a result, previous values of the manufacturing index and the overall IRG SGH barometer have been recalculated, and the changes discussed in the article refer to these adjusted values.

Barometer down slightly over Q4 2012

At the beginning of the first quarter of 2013 the IRG SGH business barometer stood at -23.1 points, which represents a decrease of 1.1 points compared with three months earlier. As in Q4 2012, banking was the only sector in which the business indicator was in positive territory. In the six other areas of the economy covered by the barometer the indicators took negative values in Q1 2013, with the lowest level again recorded for households (-47.9 points). Construction fared little better with a score of -44.8 points, the worst result since the survey began, i.e. 1993. The mood in the construction industry is very pessimistic, with less than 2% of the surveyed companies expecting an improvement and with the vast majority (80%) anticipating a further deterioration. Surprisingly, the business indicator in the trade sector also showed a negative value in Q1, which is unusual for this period of the year. This indicates a departure from typical seasonal trends in this sector, but it is too early to attempt an interpretation.

The quarter-on-quarter decline of the IRG SGH barometer was caused by a mixture of both seasonal and cyclical factors. It is normal for the business indicators to decline at this time of the year. What was quite unusual was the 5.5-point improvement in consumer sentiment, which contributed 1.2 points to the overall barometer. All the components of the consumer sentiment indicator were better in Q1, particularly assessments of the future financial situation of households and the future economic situation in Poland. Even so, consumer moods remain downbeat, with the indicator lower than where it was during the depth of the previous financial crisis at the turn of 2008/2009.

The biggest contributor to the quarter-on-quarter decline in the IRG SGH was the construction sector, which deducted 2.2 points from its overall value. On the other hand, the changes in barometer values in the manufacturing, trade and transport sectors were too small to have a significant impact.

IRG SGH Barometer, Q1 1999-Q1 2013

Breadth of annual decline narrows

Compared with the corresponding period of 2012, the IRG SGH declined by 6.5 points in Q1 2013. It was the second consecutive quarter of narrowing year-on-year declines. Four sectors saw their business indicators fall as compared with Q1 2012, namely manufacturing, construction, trade and banking. The biggest negative contributor to the annual decline in the barometer was the construction industry, where the business indicator slumped by 23.3 points y-o-y, deducting 2.6 points from the barometer’s value. Declines in the manufacturing, trade and banking sectors deducted a further 4.8 points. By contrast, improved scores were recorded for households, agriculture and transport, making a combined positive contribution of 1.2 points.

IRG SGH Barometer, January 2009-January 2013

Better outlook for Q2

The findings of the Q1 survey represent a certain departure from typical seasonal patterns. This is particularly evident in the case of households and trade. Sentiment in the construction sector remains very low. On the other hand, consumers and manufacturers are less pessimistic than in the preceding quarter. The negative impact of cyclical factors diminished for the second quarter in a row. Coupled with the anticipated positive influence of seasonal factors in the spring, this means that in Q2 conditions are likely to improve.

Prof. Elżbieta Adamowicz


Joanna Klimkowska, Ph.D.


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