The manufacturing PMI index in the Eurozone fell to its lowest level in 22 months, S&P Global Eurozone Manufacturing PMI reported. In June, the index was at 52.1 points, down from 54.6 in May.
Production levels fell for the first time in two years. It concerns both the number of new orders and export orders. Meanwhile, the data may suggest that supply chains are getting closer to stability, as lead times have lengthened the least in a year and a half. Inflationary pressures also relaxed as both labor input costs and product prices increased at a slower pace. Nevertheless, business sentiment fell to its weakest level since May 2020. Concerns about the global economic outlook and inflation may have weighed on expectations for economic growth.
In Poland, S&P Global Poland Manufacturing PMI fell in June to 44.4 points from 48.5 in the previous month, while analysts expected a reading of 48 points. Production and new orders plummeted in the face of severe macroeconomic problems, including soaring inflation and the war in Ukraine. Inflation in labor input and output has clearly decreased. Finally, business confidence has dropped to its lowest level since early 2020.
The annual inflation rate in Poland probably accelerated to 15.6 percent in June from 13.9 percent a month earlier - according to preliminary data of the Central Statistical Office. If the data are confirmed, it would be the highest reading since October 1996, all in the face of soaring global commodity prices triggered by the war. The main upward pressure was exerted by fuels for personal transport (46.7%), followed by prices of electricity, gas and other fuels (35.3%), and then food and non-alcoholic beverages (14.1%).
All of this may point to a stagflation scenario for Europe and for Poland, where central banks may continue to raise interest rates, which may further dampen economic growth. In Poland, the market estimates that the WIBOR 3M rate may increase up to 8% this year.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
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