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BIEC: economic climate dips in January but remains fairly strong


2011-01-30



The Leading Indicator (WWK), which provides information on future trends in the economy, eased slightly in January, but stayed above its pre-crisis peak of mid-2007, the Bureau for Investments and Economic Cycles (BIEC) reported. According to the Bureau, this suggests that the pace of recovery in Poland is faster than is usual after downturns, although some downside risks remain.

Of the eight component indicators of the WWK, four improved in comparison with December while four deteriorated. The flow of new export orders weakened for the second consecutive month in January, mainly in the computer and automotive sectors. Domestic orders were also lower, with the sole exception of the food industry. At the same time, inventories increased last month, which according to the BIEC might suggest that industrial output growth could slow in the months ahead. This is all the more likely as domestic demand is set to be hurt by rising inflation and higher VAT. Furthermore, labour productivity deteriorated again in January, which coupled with rising production costs is likely to put a damper on wage growth in the manufacturing sector, and consequently lead to slower growth in consumption.

Nevertheless, companies continued to report improving financial performance in January, and were generally more optimistic about the overall domestic economic situation than the month before, regardless of sector of operation or company health.

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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