Polish industrial output slumped more than expected in July, backing off of its path towards recovery, while wage growth in Central Europe's biggest economy also came in below expectation.

Industrial output dropped by 2.7% year-on-year against analysts' expectations of -0.6%. On the month, production fell 8.5%.

"After a reasonably good reading in June, we hoped that this was the beginning of at least stabilisation and searching for a way to rebound, but meanwhile the reading was clearly weak," Santander Bank Polska economist Grzegorz Ogonek said.

"I think that achieving any positive dynamic this year would be a good result."

Earlier this month data from Hungary showed a bigger than expected industrial output drop for June, while data for the same month from the Czech Republic surprised to the upside, showing continued growth, though at a lesser pace than the month prior.

Polish corporate sector wages grew 10.4% in July, slightly below expectations of 11.1% growth and below the inflation rate, which eased to 10.8% in July.

"This certainly is data showing another risk factor that perhaps household income is not all as good as we thought," Ogonek said, adding it was a matter to be monitored for now more than a reason to revise forecasts downwards.

Data last week showed that Polish GDP fell 0.5% year-on-year in the second quarter compared to 0.3% forecast by analysts, who pointed to household consumption as the main driver.

On the cost side, producer prices decreased for the first time since 2020, easing by 1.7% year-on-year in July against analysts' expectations of -1.1%. (Reporting by Karol Badohal in Warsaw; Editing by Alison Williams)