The Forward Looking Indicator (WWK), an early predictor of future economic trends, rose by 0.5 points in December 2024 compared to the previous month, signaling a modest upward trend in the latter half of the year. Since its low point in July 2024, the index has improved by 2.5 points, driven primarily by sustained consumer demand and a mild increase in business optimism regarding future financial conditions and economic growth prospects. However, these improvements have not yet translated into a broader, sustainable economic recovery. Despite some encouraging signs, critical economic indicators remain subdued. The inflow of new orders to manufacturing firms has shown no significant improvement, demand for corporate investment credit remains weak, and investor activity on the Warsaw Stock Exchange continues to stagnate. These factors underscore the challenges in transitioning the economy toward a more dynamic and modern growth trajectory. Looking ahead to 2025, economic growth is expected to rely heavily on consumer spending, fueled by robust wage increases and social benefits. However, this consumption-driven growth is unlikely to curb inflation or foster structural economic modernization. Sectoral Performance and Index Components Of the eight components of the WWK index in December, four showed slight improvement, two declined, and two remained unchanged. • Industrial Labour Productivity: The most notable improvement was in labour productivity, but this was largely a temporary effect of fewer working days and workforce reductions in the manufacturing sector. Over the long term, productivity has been on a downward trajectory since spring 2023. • Financial Optimism in Industry: Business sentiment surveys indicated a minor, consistent improvement in company financial assessments during the second half of 2024. However, a net 16 percentage points of businesses still reported financial deterioration compared to improvement—a level unchanged from a year ago. The coming increase in the minimum wage on January 1, 2025, is expected to add to cost pressures, albeit on a smaller scale than previous hikes. • Money Supply Growth: Since September 2024, the M3 money supply has been growing in real terms, with November data showing an annual increase of over 3.5%. Notably, cash in circulation rose by more than 10%, hinting at a potential consumption-led economic recovery. The manufacturing sector continues to struggle with declining new orders, especially in export production. Of 22 industries surveyed, 21 reported declines in export orders. Sectors like clothing, leather, and metal products experienced the steepest drops, with negative order balances nearing 30 percentage points. In contrast, companies in printing and media reproduction fared relatively better in terms of export demand. While the slight uptick in the Forward Looking Indicator offers cautious optimism, the underlying economic issues highlight the need for structural reforms and a shift toward investment-driven growth. Without significant changes in industrial and financial dynamics, the economy is likely to remain reliant on consumer spending, with limited progress in addressing long-term vulnerabilities. Source: BIEC