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BIEC: economic climate tumbles in February


The Leading Indicator (WWK), which provides information on future trends in the economy, took a sharp dive in February, shedding four points in what was the biggest monthly fall since early 1990s, the Bureau for Investments and Economic Cycles (BIEC) reported. According to the Bureau, it is too early to tell whether the fall signals a new downward trend or was merely a result of a series of negative short-term factors, notably a surge in inflation caused by rising global food and oil prices, continued financial instability in some EU countries, a temporary weakening of activity in Germany towards the end of last year, or a fall in consumer demand in Poland after a rush on stores in December to avoid the VAT rise.

Of the eight component indicators of the WWK, all deteriorated in February with the sole exception of labour productivity (but here too the improvement was small). Importantly, there was a sharp drop in new manufacturing orders, particularly export orders. The biggest declines were reported by makers of non-durable consumer goods, while orders for investment goods and food products were stagnant. The pharmaceutical industry was the only sector where order books continued to expand.

Inventories of finished goods increased again in February. Furthermore, companies’ assessments of their financial condition deteriorated, and so did evaluations of overall domestic economic situation, which plunged into negative territory.

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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