Poland Macro Weekly: Cruel Summer

TOP MACRO THEME(S):

A credit boom that won’t be (p. 2) – We expect current trends to continue in 2024 and 2025 – with loans expected to accelerate, while deposits growth is likely to further moderate.

WHAT ELSE CAUGHT OUR EYE:

CPI inflation in July jumped to 4.2% y/y (flash estimate) from 2.6% y/y in June. The shift was mainly due to the partial unfreezing of energy prices, but its impact on overall inflation turned out to be weaker than feared – CPI inflation came in below forecasts. Core inflation, CPI excluding food and energy, has likely stabilized at 3.6% y/y. Please see more on CPI for July in our Macro Flash: Inflation clearly up, yet below forecasts.
Poland’s manufacturing PMI unexpectedly rose to 47.3pts in July from 45.0pts in June, contrary to the consensus which pointed to a slight decline. The PMI reached its highest level in 4 months, but it has remained in the recessionary zone since May 2022, marking the longest period of negative readings (below 50pts) in the survey's history. The improvement in July resulted from a less severe deterioration in new orders, a smaller decline in production, and a reduced rate of employment cuts. This rise in the PMI index offers hope for an improvement in the manufacturing sector, aligning with the earlier GUS economic sentiment results and our medium-term forecasts.
The Economic Sentiment Indicator (ESI) in July fell below the long-term average, to 99.6pts, compared to 101.4pts in June. Weak sentiment persisted in the industry sector, along with a deterioration in the service sector's business climate. In the consumer survey an increase in inflation expectations over the next 12 months was observed.

THE WEEK AHEAD:

NUMBER OF THE WEEK:

3.0%– LFS unemployment rate in June, the 2^nd lowest in the EU (after Czechia) and 0.3pp higher than the record low in early 2023.