Surprising Polish construction slump in January bodes poorly

Polish construction activity slumped 6.1% on-year in January, compared to the consensus of 8.1% growth. This follows impressive 14% on-year growth in December. ING, which projected a 3.1% increase in January, says the data bodes poorly for a recovery in investments this year.

Many EU-backed projects from the previous perspective have ended, with a slow start to new ones and a weaker housing market, the bank observes.

Production growth in civil engineering construction plunged 10.5% in January, reflecting the final phase of infrastructure projects financed by disbursements from the 2014-20 EU financial perspective. Launching new projects, financed by the new EU budget, is time-consuming.

Building construction also declined, by 7.3%. “In December, the ‘2% Safe Credit’ programme came to an end. A new programme is unlikely to be launched before the second half of 2024, and its details are still being worked out. Data for the end of 2023 show that, after a period of rapid growth in mortgage credit demand, there was a sharp slowdown,” ING observes.

“Given the cap on the price of housing qualifying for public subsidies, the completed programme saw most impact in smaller towns. It is probably difficult for developers to assess locations of the most favourable places to start new investments,” the bank adds.

In early January, Poland’s main construction steel producer, CMC Poland, said supply-side adjustments and the impact of increasing levels of residential and infrastructure construction should drive sequential improvements in financial results beginning in spring (see Kallanish passim). However, conditions in Europe are expected to remain challenging, it added.

Adam Smith Poland