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The Warsaw Voice » Business » December 16, 2009
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Industry doing better
December 16, 2009   
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Experts say the economy may be stimulated by growing household consumption and revived investment, as indicated by encouraging retail sales data and construction and assembly figures. According to the Central Statistical Office, in October industrial production was 1.2 percent lower than in October last year and 1.9 percent higher than in September this year, showing that the worst of the economic slowdown may be over. The October year-on-year drop in production was not only lower than expected but also slightly lower than in September, when production decreased by 1.3 percent year on year.

If seasonally adjusted, the figure for October is even stronger, showing a 0.6-percent rise in production year on year. In September, seasonally adjusted production was 2.1 percent lower than in September last year.

This general improvement was unevenly distributed across industries. In October, production dropped in 19 of 34 sectors, compared with 17 in September. Machine and equipment producers were hardest hit in October, recording a 17.7-percent drop in production. The coal mining industry was only slightly less affected, while metal production fell by 9.8 percent. As usual, producers of computers and electronic goods reported the highest increase, at 13.9 percent. Paper and electrical equipment producers reported 9.5-percent and 6.5-percent increases respectively. Production in the food and beverage industries also rose.

Producer prices were 2 percent higher than in October last year. They accelerated slightly from September when they were 1.6 percent higher than in September last year. Construction and assembly prices stayed at the same level as in October last year, after a 0.8-percent year-on-year drop in September.

The building industry continued to grow. Construction and assembly output rose by 2.7 percent compared with October 2008 and by 7.6 percent compared with September this year. Seasonally adjusted output was up by 5.3 percent year on year and 0.2 percent month on month. Companies dealing with the construction of buildings increased their output by 7.6 percent. Those dealing with infrastructure projects reported a 6.2-percent rise. This indicates that investment spending on infrastructure projects is still on the rise, according to experts. Analysts at the Economy Ministry say the trend will continue in the final months of the year.

The October increase in construction output, coupled with stable industrial production, shows that the economy improved in the first month of the fourth quarter. Experts at the Economy Ministry estimate that in November production rose by around 5 percent.

Not only macroeconomic data but also businesses are showing signs of improvement. According to experts at the Lewiatan Polish Confederation of Private Employers (PKPP), adverse trends in the corporate sector have slowed. Although the sector's sales revenues increased by a mere 1.1 percent in the first nine months of the year, while business expenditures rose by 1.6 percent, the rate of return on sales was relatively high considering that this was a period of economic slowdown.

The breakdown of business expenditure increases was different from that recorded during the previous economic slowdown of 2001-2002. Wage expenditure grew faster than overall expenditure-the share of wage expenditure in total expenditure increased by 0.6 percentage points.

This means that, in contrast to the 2001-2002 period, businesses did not try to cushion the impact of the crisis by cutting employment and wages.

Why the new policy? There are several reasons, Lewiatan experts say, but the most important one is that the Polish economy has undergone structural changes in recent years, with human capital increasingly becoming the single most important asset for businesses. As a result, even at a time of economic slowdown, employers invest in their staff, Lewiatan experts say.

In the nine months to the end of September 2009, companies employing over 50 people posted a net profit of 60 billion, or zl.3.6 billion less than in the same period last year. Lewiatan experts expect that net profit for the full year 2009 will be higher than for 2008.

This does not mean that businesses and their employees have been unaffected by the crisis. Although the percentage of businesses reporting a net loss increased only slightly, to 27.5 percent at the end of September 2009 from 26.5 percent at the end of September 2008, the amount of the losses was almost 50 percent higher. According to experts, it is clear that businesses that invested to expand and improve their efficiency at a time of prosperity have coped with the crisis better. Those that had problems and performed poorly when the economy was booming are now in trouble.
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