Poland Macro Weekly: Darkening skies

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TOP MACRO THEME(S):

  • RRF funds support mostly transport infrastructure in CEE (p.2) – railway and road infrastructure related entities outclass other recipients of the RRF funding in the CEE region.

WHAT ELSE CAUGHT OUR EYE:

  • Core inflation (CPI less food and energy prices) dropped to 4.1% y/y in October from 4.3% y/y in September and its momentum (annualized % m/m sa change) weakened significantly compared to previous months. The key measure of core inflation should hoover around 4% until 2h25 when it will start to gradually decline towards the inflation target, permanently reaching it in 2026.
  • Consumer confidence indicator for November deteriorated to −17.1pts from −15.8pts, contrary to expectations for a slight improvement. The disappointing result is largely a consequence of poorer assessments of the economic situation in Poland (due to probably, inter alia, the recent flood, recent upward revision of budget deficit and the uncertain geopolitical situation). Nevertheless, the sentiment about the future has not changed significantly, while assessment on the ability to make some important purchases even slightly improved.
  • Construction output in October was -9.6% y/y, well below expectations (consensus: −6.8% y/y) and even weaker than in September (-9.0% y/y), despite a favorable difference in the number of working days. However, one should remember about peak of investment activity in late 2023 (creating high base effect this year) just before the end of the previous multi-year EU budget.
  • The government has announced a plan to extend the cap on electricity prices at 500 PLN/MWh until September 30, 2025, and to once again suspend the ‘power fee’ (applicable for households only). We estimate that this would lower CPI inflation by approximately 0.3pp relative to our previous forecast, bringing its peak in March 2025 down to 5.5 y/y%.

THE WEEK AHEAD:

  • Poland’s macro calendar is packed with monthly economic activity indicators for October, detailed GDP figures for 3q24 and the flash CPI for November.

NUMBER OF THE WEEK:

  • PLN 5.06bn – the total cost of freezing energy prices for households in 2025.

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