Unexpected deterioration in the Polish processing sector
The decline in the index in June was due to a reduction in all its components – current production, new orders, employment, delivery times and material inventories.
The PMI remains below the 50‑point threshold that separates growth from contraction, for the 14th consecutive month.
Sharp drop in orders in processing
In June’s PMI, the component for new orders fell to 42.6 points – the lowest since June 2025 – and the component for new export orders dropped to 44.8 points, the lowest since July 2025.
Both components signaled a rapid decline in new orders in June. Responding firms said the lower number of new orders was due to “weaker demand, economic slowdown, difficulty acquiring new customers, high inventory levels at buyers and limited client budgets.” We believe that the high base effect, linked to a strong rise in orders for defense companies due to the SAFE program – as indicated by GUS data showing a very strong increase in industrial orders in May – partly accelerated the decline in new orders in June.
An additional factor contributing to the drop in orders in Polish processing was the de‑escalation in the Middle East, which reduced concerns about supply‑chain stability and lowered purchases of new production assets after their temporary rise in May. The component reflecting these purchases fell in June to the lowest level since February 2026.
Companies continue to adjust employment
The drop in orders led to a decline in current production, which – after a temporary rise in May – fell in June at the fastest pace since July 2025. The scale of the decline was mitigated by the fulfillment of previously accumulated production backlogs, whose level fell in June at a slightly slower rate than in May.
Lower activity in processing also pushed further employment cuts, which respondents said were due to “falling order numbers, cost cuts, lower production demand and non‑renewal of contracts.”
Companies cited demographic factors (employees reaching retirement age) and the need to adjust to reduced demand and rising costs as key reasons for the persistent employment decline in processing.
Cost pressure easing
June was the second consecutive month in which the production cost component fell, although its level still indicated rapid cost growth. The decline signals reduced cost pressure in Polish processing linked to rising raw‑material and transport costs due to the Middle‑East conflict. In June, firms still sought to pass higher costs onto end customers, reflected in the continued rapid rise in finished‑goods prices.
Like production costs, the component showing price increases fell in June for the second month in a row, indicating a decreasing pressure to raise consumer goods prices. We believe the fall in production cost and finished‑goods price components in June points to a gradual fading of the pro‑inflationary effects of the Middle‑East conflict.
Sharpest decline in optimism in Polish processing since 2020
June PMI results indicate a significant worsening of industrial processing prospects in Poland. The index depicting 12‑month production expectations fell in June to the lowest level since December 2022, hovering just above the 50‑point threshold that separates growth from contraction. Compared with May, the index fell by 10.2 points, its largest monthly drop since March 2020 – i.e., since the start of the COVID‑19 pandemic (excluding that period, the June drop was the largest in the historical series). Responding firms expressed “concerns about demand and supply shortages.”
We find the sharp decline in optimism in June surprising given the influx of significant orders directed at defense‑production firms and the sustained good outlook for consumer and investment demand. The June drop in optimism signals a downside risk to our 2026 growth forecast, and a deeper assessment of this risk will be possible after the release of industrial production data for June.
