Macroeconomics conditions
First signals of economic growth weakening were noted in the second half of the year 2008. In the next quarters of 2009 difficulties in many domains of economic were more and more intense. The investments were becoming smaller, the inflow of foreign investments inflow were decreasing, the conditions of obtaining and accessibility of bank credits were more tough for companies, difficulties on the labour market were increasing. Decreasing work efficiency was reducing companies’ competitiveness. The exporters had problems with selling, because the foreign markets’ demand for polish products was shrinking. The biggest production declines took place in industry.

In the year 2009 the indicators of gross domestic product growth were the lowest in period from the first till third quarter of the year 2009. The first signals about the improving situation appeared in the end of the year 2009 and the results in the first semester of the year 2010 indicates on the continuation of the positive tendencies in the most of domains of economy. The industry obtains high growth indicators, the turnovers in the foreign trade are rising, the inflation stays within determined by The Monetary Policy Council range. In the first half of the year 2010, gross domestic product were growing of 3,3%. Amongst the biggest branches of economy only the building industry was noting deep production decline.

In the period of recession the speed of economic growth weakening, moderate inflation growth was accompanying. At the end of the year 2008 inflation indicator average was 3,3%, after a little fluctuation in December 2009 inflation grew to 3,5%, and in July 2010 was shaped at the level of 2%.

The prices of building production was reduced and a little growth of the prices was noted by producers of the processing industry, whereas prices in mining engineering and in power engineering was rising. It is need to underline that rediscount and reference rate was stable and at low level.

After few years of dynamic wages growth, pressure on wages slowed down; in the year 2008 average wages in enterprises sector have increased of over 10%, in 2009 growth of 4,4% was noted, and in the first half of the year 2010 of 3,3%.

The labour market was changing, although it was less intense than it was predicted in first period of recession. Constraints in the tasks realization were forcing companies to workers discharges; admittedly employment in the enterprises ector was in 2009 lower than year before only of about 1,2%, but in processing industry employment was decreased of 6,7%. The employment was rising in services and building industry. Because of economic activity in the first half of the year 2010 reconstruction of the employment level follows. The unemployment rate recorded from 9,5% At the end of the year 2008 increased to 11,9% at the end of 2009, and in July 2010 has decreased a little and was at the level of 11,4%, at big fluctuation in particular regions.

To disadvantageous and worrisome phenomena belongs: Lack of stability even in those domains, that are noting high growth and regress in the building industry hazardous to punctual prioritized tasks realization. Declining investments – from the second half of the year 2008 dynamic of the investments growth was clearly decreasing. Both in 2009, and also In the first semester of 2010 there is no noticeable improvement in investing. High budget deficit, that can be rising because of the costs of the flood effects removal and ascending public debt dangerously approaching to the border threshold of 55%. It may be hazardous for polish economy stabilization.

Building industry
After Poland’s entry in Union’s structures prosperity has started in the building industry. Development priorities for the building industry sector was determined, that was specified in „The Operational Programme Infrastructure and Environment for years 2007-2013” cofinanced by UE funds. This programme’s tasks were „strengthened” by entrusting organization of the football championship EURO 2012 to Poland (which required taking of suitable operations specified in detailed programmes) and preparation of „Motorways and national Road building programme in years 2008-2012”.

Realization of the gigantic tasks was started, which was connected to building activity intensification. Crisis on the European markets have slowed down building development, building production had slower growth, and companies more frequently signalized about worse circumstances and about meaningful order decrease.

In the year 2008 building production growth indicator was at the level of 11%, it was still high growth, but lower than expected and previous prognosis. Particular types of building industry reactions on crisis were different. The fastest reaction was noted in developers housing, apartments turnover was getting lower, difficulties in obtaining credits for housing investments was limiting their realization. The situation in infrastructural building industry was different, where work growth tempo weakening wasn’t great and was mainly a result of organizational and system causes. Huge tasks were undertaken without sufficient previous preparation, as a result tasks realization fixed dates were postponed.

Gross domestic product growth in 2008-2010 r. according to quarters in %

 

Markers illustrating the economic situation of Poland

Source: Central Statistical Offi ce Statistical Bulletins, Information of social – economic situation of the country at the end of the period

General information about building industry

Source: Central Statistical Offi ce Statistical Bulletins */building installation making


In the year 2009 further building activity weakening had place. To accruing problems, discussions in the building environment about crisis and it’s effects accompanied. They were comparing present situation to the crisis in building industry in years 2000-2003, when the building production volume was decreased by almost ¼. However in the year 2009 the situation was more advantageous both regarding projects funding and also companies’ technical equipments, personnel qualification, opening for European markets.

The lack of efficiency in the projects preparation for realization remains. We couldn’t avoid crisis and at big fluctuations in particular months to scale whole year 2009 building production in companies employing>9 people grew by 3,7%; high growth of the infrastructural building industry was noted, especially road building. Decrease took place in special works (mainly finishing) and in housing and non-housing (hotel constructions, commercial objects, warehouses) where the foreign capital is engaged, also in crisis.

Beginning of the year 2010 was very disadvantageous for building industry. Rough weather conditions (high frosts and snow) had effect on constraints in working realization, Building industry has a seasonal character, therefore beginning of the year haven’t empowered to conclusions about expected tendencies in nearest months. However the next two months haven’t brought expected improvement.

Escalation of the building activity (in spite of flood) took place in March and April, but in July rise wasn’t achieved. Admittedly loss of first months of the year were reduced but not liquidated. Building production after 6 months was lower of 6,1% than year ago, works of investment character were of 11% lower, whereas Repair works of 5,7% higher.

Delays of the first months of the year 2010 were so large, that in the period of semester production decrease was noted in every type of building works; the biggest worry is in infrastructural building industry, where in first half of the year objects of civil engineering realization was lower of 5% then in last year 5%, while intensification of infrastructural and road works, and tasks connected with EURO 2012 was expected.

Rise/drop in building [expressed in % in comparison to the previous year]

The number of apartments put to use after 6 months of the year 2010 was of 16% lower the in last year, but more and more apartments are started to build (developers are increasing investment activity). In the first semester of 2010 begun of almost 20% more apartments than in last year, and developers (that are building apartments for sell and rent) started of 2/3 more apartments. If such situation will keep up, that constraints In housing wouldn’t be so deep as predicted.

In basic economic relations in building sector the following changes took place: Employment growth in 2009 was 5,3%, After a few years of difficulties with specialist gaining as an effect of earning emigration, companies were filling deficiencies up. During period January -June 2010 at disadvantageous weather conditions and low production results the level of the employment was lower than in previous year of 0,3%.

Very high in previous years wages dynamics is decreasing; in 2009 wages in building industry have risen of 2,8%, while in 2008 was rising of 13%. In the first half of the year 2010 average wages were of 2,3% higher than a year ago.

The decreasing during many months prices of the building productions were stopped; in December 2009 building production prices were lower of 0,7%, in May 2010 were stable, and in June increase was at the range of 0,2%, which is substantiated by not so violently decreasing building materials prices.

Despite of financial condition of the building companies improvement (in 2009 net profit in companies above >49 employed have risen by 2,8%) still 15% of companies had loss. In the first half of the year 2010 net profitability index was at the level of 3,2% (was lower than a year ago), and over 40% of the respondents haven’t showed a profit.

Increase/decrease of the building industry in % to previous year

Prosperity research
Evaluating the situation in the building industry, we must take notice on prosperity researches, in which companies’ managerial staff gives their opinions about the economic situation, order wallet, financial conditions, barriers that tasks realization is harder. It is valuable information source of moods and expected changes.

The divergence between real changes indicators in the building industry and the companies opinions takes notice. On the negative evaluation of the prosperity (beside difficulties in tasks realization) psychological factors and giving in to mass-media opinions had influence.

In the nearest months prognosis it is optimistic, that, companies notice admittedly insignificant but improvement of the situation, however underline, that companies situation of the particular class size is diversified.

In small companies (including „micro”) present state and predicted changes estimation are worse than in big and medium companies. Companies lists different causes making difficult of the tasks realization, their meaning is changing. Currently on the first places occurs: the competition between companies, high work costs, lack of demand. Amongst barriers of the building growth companies aren’t listing „long period” of the preparing task for realization, which is fundamentally one of the principal causes of the problems in building industry, and not the lack of demand mentioned by managerial staff.

Industrial production
The industry is the sensitive barometer of the situation. After high production growth index from 2006 till the half of the year 2008 in the second semester of the year 2008 it turned out that recession is inevitable. The low index in the next quarters of 2009 confirmed that.

The production growth in the fourth quarter of the year 2009 was the announcement of the return on the path of the accelerated growth. As an effect year 2009 was closed with sold production decrease of 3,2%, weak results of the first semester couldn’t be make up. The high growth is gained by industry in the first half of the year 2010, on which have effect not only rising demand of the domestic market, but mainly export orders. After almost 2 years of the pause polish producers are coming back on the foreign markets.

In years 2006-2007 work efficiency in industry was rising by 6-10% a year, and in 2008 was only by 1,1% higher than a year ago. In the year 2009 efficiency increased by 2,4%, at lower of o 5,5% employment and average monthly gross wages growth by 4,9%. The first half of the year 2010 was characterized by high efficiency growth (by 13%), by lower average employment by 2,1% and average wages growth by 4,6%.

To the industry working for building industry belongs among others mineral building materials industry. In years 2006-2007 demand for building materials was high, production was increasing dynamically. In the year 2007 at high growth of the building industry, lack of materials was noted and “unbalance” in some (not all of them) sections of the branch markets was deep. The materials producer were increasing production and raising the prices. The year 2008 characterized itself by decreasing building materials production growth tempo; sold production was higher than a year before by 3,7%, at substantial fluctuations in particular months.

General prosperity climate indicators monthly, prognosed orders wallet In building industry and real growth index in years 2009-2010



Source: Central Statistical Office Monthly prosperity research

Industry sold production in general; changes in %


The year 2009 has started very badly, with over 20% decrease of the production. Although next quarters were a little bit better, but in the whole year 2009 sold mineral building materials production was lower by 6,4% than a year before. Almost every themost important materials in 2009 haven’t gained the level from the last year. Only in 2010 „breakthrough” in building materials production was noted.

It is suprising, that more and more materials are produced despite of decreasing building industry. It comes from usage of the collected before materials reserve and currently preparing of the conditions for building activity increasing in the second semester. In the first half of the year 2010 mineral building materials sold production increased by 9,5%.

Glazing industry
Till 2007 production in glazing industry was rising and from the second half of the year 2008, likewise in other domains, production was limited. In 2007 (at 10,5% growth of the whole branch production value) moderate increase of the glass float production float (1,4%) took place. Meaningfully the combined onechamber window-panes has production has increased (by 18,6%).

Domestic glassware growth by 6% was noted. In 2008 in economy as the whole, including process engineering and glazing industry recession was already felt. The sold production in the glazing branch was lower by 1,8%. The largest decrease of the production was noted in marketable products (table glasses) by about ¼. Those assortments are directed for export, and in 2008 export difficulties has already started. Also the production of the flat glass was decreased comparing to high level in the year 2007. The complex one-chamber panes production have increased (by 9%).

In 2009 further decrease of the glazing industry sold production took place; that was by 2,7% Lower than a year before.

The glazing industry goods production have decreased, such as almost every products put to the group of mineral materials. The exception makes complex manychambers panes, which production increases from 2007, but the amount is relatively low.

In the first half of the year 2010 in the process engineering, in building materials industry activity took place, also glazing industry notes increase of the production by about 15%.

In the majority glazing industry products growth was very high. It is a result of a prosperity on the domestic market improvement and of increasing export. The share of glazing industry plants employing >49 people in the most important glassware production is over 90%. Small establishments produced in 2009 about 8%, only in complex many-chambered panes the companies share was bigger (about 15%).

In the year 2009 almost 60% sold production value devolved on flat glass with formed and further treatment machine, 30% was a domestic glassware, and 12% glass fibres and other types of glass. Comparing to previous years the flat glass selling share increased, at lower share of the domestic glassware.

Since few years „float” type glass and complex onechamber panes production have the fastest growth. The glazing industry counts as exporter of its products, many European markets highly rates quality of polish glass products. In years 2006-2007 export’s increase counted in euro was almost 20%. High indexes were gained both because of rising amount of export (mainly glass products), and also as a result of growing prices at foreign markets.
The recession in economics of polish glass products countries-buyers had a reflection on export’s quantity. In 2008 glass products were exported less by al most 15%, but the general value of glazing industry export was in 2008 higher than year before, because prices for the glass products still were rising.

Year 2009 indicates further export break-down.The glass and glass products export (in tones ) was over 20% lower comparing to the year 2008. The prices at world’s markets are have also decreased, as the result, glazing industry gained income from export (counted in euro) lower than in last year. Decreasing export of the glazing industry products has negative effect on quantity of the production, which already was in 2008, and got deeper in 2009. Home market (which also presently have problems) couldn’t „intake” such substantial amount of glass products.

In the year 2010 the glazing industry on the esport markets feels improvement. If that tendency will be stable in longer period, export would be main factor of the glazing industry branch strengthening.

Building materials industry and glazing industry production growth (in %)


Source: Central Statistical Office Statistical Bulletins, Inputs and Outputs of the Industry

Basic indicators in industry in years 2007-2010

Source: Central Statistical Offi ce Statistical Bulletins, Inputs and Outputs of the Industry 1/ companies employing >49 people

Both building materials industry and glazing industry belong to high profitability branches. Although profitability in last few years was getting lower, but in 2009 average net profitability indicators in building materials industry plants were 7,6%; also In the first half of the year 2010  net profitability was high, amount to 5,7%. In the glazing industry for a few years profitability exceeded 8%, but in 2009 decreased to 2,7%. In the first half of the year 2010 profitability in the glazing industry increased to over 5%.

Summary
The crisis in the polish economics was less painful than in other UE countries, Poland hasn’t noted gross domestic product drop, most of domestic and foreign prognosis centres predicts in 2010 gaining 3,5-4% of economic growth, for which composes dynamically increasing industry, increasing export and growing domestic demand. It doesn’t mean, that polish economics is free from problems, there are many of them. Except of problems having social character, the most important is ascending budget deficit (costs connected to the flood are increasing it) and
quickly growing public debt.

The key task is a reduction of the elevated in the year  010 budget deficit and limiting the growth of the public debt. The directions of the activity serving this purpose were specified in accepted by government „The Assumption of the Budget Project for the year 2011”. Detailed prognosis concerning dynamics and structure of expenses were placed in The Country’s Perennial Financial Plan.

Probable tendencies in the building industry in years 2010-2011
In the year 2009 building industry has gained growth mainly because of the infrastructural building realization. It was expected, that the infrastructural building industry, likewise in the year 2009, also in nearest years maybe and should increase, which will decide about the situation of the whole sector. Data for the first semester of the 2010 doesn’t confirm those predictions. The building production is lower than year before, the building sector has problems not only with acceleration of the delayed infrastructural tasks, but also with liquidation of deficiencies of the first monyhs. It is not indeed the crisis in the building industry „new wave” (as some say), but it requires a revision of the previous forecasts and taking into consideration, that realization of the tasks specified in programmes will be much longer.

Structure of sold production of glass production in 2009


Source: Central Statistical Office, Production of industrial goods

Profitability in building materials industry and glass industry [%]


Source: Central Statistical Office, Industry – expendirures and results

Production of selected glass products

*) companies employing >49 peoples
Source: Central Statistical Offi ce, Industrial production

For the infrastructural building industry the most important problem will be intensification of the delayed tasks realization. Non-housing (service) haven’t grew in 2009 and it was valuated, that gaining increase in 2010 is unlike. However last months indicate on a drawing growth tendencies. If the foreign investments will come back on the polish building market – service building could be a domain having effect on growth if the building sector and creating demand for the glass products. In housing, the number of the apartments put in use in 2009 was little lower from the record level of the 2008. Admittedly in the year 2010 still the housing is getting lower, but beneficial is growth of started apartments (mainly in developers building industry). It means that regress in the housing won’t be such substantial as it was previously assumed we can expect the increase of the number of the apartments put in use already in 2011.

The glazing industry production decrease, which was in 2009 was a result both of lack of demand on the home market and export constraints. In the year 2009 all branch indicators were getting worse; The first half of the year 2010 is a return of the prosperity in the glazing industry. The sold production is rising, the number of products is growing, the demand on foreign markets for the glass products is bigger and bigger, profitability indicators are high, companies are completing employment, which favours ascending wages. There are chances, that in 2010 the glazing industry will keep itself amongst leading branches up in process industry activity.

prof. dr Zofia Bolkowska
Helena Chodkowska University of Management and Law In Warsaw

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