Poland's manufacturing sector experienced another contraction in November, with new orders declining at their fastest rate in three months, leading to a drop in output, according to an S&P Global business survey released on Monday.

The Poland Manufacturing Purchasing Managers' Index (PMI) fell to 48.9 in November, down from 49.2 in October, marking the first decline in five months. A PMI reading below 50 signals a contraction in activity.

New orders continued to decrease, with the pace of decline accelerating, driven by ongoing weakness in European demand, especially from Germany. This downturn, which began in March 2022, is now the longest in the history of the survey, Reuters news agency reports.

“The headline Polish PMI suffered a setback in November as a sharper decline in new orders meant that manufacturers were unable to sustain October's brief increase in output,” according to Trevor Balchin, Economics Director at S&P Global Market Intelligence.

Despite the difficult conditions, employment in Poland's manufacturing sector increased for the second month in a row, with the highest job creation rate since February 2022. Companies are reportedly hiring full-time staff to enhance their capacity.

Moreover, price pressures showed significant relief, with input prices declining for the sixth time this year, and output prices being reduced at the fastest pace since October 2023.

Firms attributed this to strong price competition and lower costs for raw materials, including metals and chemicals.

Furthermore, the 12-month production outlook dropped to its lowest level since December 2022, as concerns about the European economy and geopolitical tensions dampened confidence. 

However, according to Balchin, the PMI trend indicates that the sector may be nearing a potential recovery phase.