Poland Macro Weekly: Dove song

TOP MACRO THEME(S):

Dove song (p. 2) – we present a summary of updated quarterly forecasts, yet the scale of revisions applied to main variables was limited this time. We stick to current interest rate path (return to cuts in July 2025), although see a risk of an earlier cut (March 2025) and update our view on fiscal perspectives.

WHAT ELSE CAUGHT OUR EYE:

A set of monthly indicators for August was rather disappointing. Retail sales increased by 2.6% y/y, slower than in July. After seasonal adjustment car sales (one of the drivers of sales in recent months) have declined somewhat in m/m terms. Estimates based on card data confirm that for another month in a row the dynamics of expenditure on services exceeded the pace of expenditure on goods. Consumers also seem to be rebuilding their financial cushions, which were retrenched during the period of high inflation. Meanwhile fall in construction output was more profound than expected (-9.6% y/y) and had a widespread character. Calendar effects worked against the August reading (-1 wd y/y), however, the sources of weakness run deeper and include a reticent inflow of the EU funds from the new perspective and meager demand on the housing market.
M3 money supply in August increased by 7.8% y/y compared to 8.3% y/y in July. The y/y growth of M3 has been roughly in the range of 7.5-8.5% y/y since the middle of 2023. In August, cash in circulation grew the fastest for another month (8.5% y/y), and other, broader monetary aggregates grew slightly slower.
Registered unemployment rate in August remained unchanged compared to July, at 5.0%, against the seasonal pattern. The number of newly registered unemployed for reasons related to the workplace remains stable though.

THE WEEK AHEAD:

The MPC meeting will be at the center of attention – no change of interest rates is expected; however, we would hope for the MPC’s comment on relatively stronger than expected monetary easing in the US (and possibly also in the euro area) and its impact on the domestic policy. Monday will bring September flash CPI reading (it should approach 5% y/y), followed by PMI on Tuesday (details in the calendar).

NUMBER OF THE WEEK:

PLN 23bn – financial aid available for reconstruction works after the flood (including EU funds), which according to prime minister, D.Tusk, should cover costs of reconstruction in the next dozen months.