Poland Macro Weekly: Economy of paradoxes

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TOP MACRO THEME(S):

• Economy of paradoxes (p. 2) – we present update of our quarterly forecasts for this year and for the first time reveal our quarterly predictions for 2025. The biggest change versus previous scenario concerns NBP rates path.

WHAT ELSE CAUGHT OUR EYE:

• The first set of monthly indicators for May has been relatively soft, especially industrial output and employment. Output in industry dropped by 1.7% y/y, continuing the rollercoaster ride due to swinging direction of calendar effects. Seasonally-adjusted numbers (our calculations) look a bit better and point to a stagnation or a minor fall in output in recent months. The main drag on activity comes from sections embedded in the automotive value chains. It seems that the expected industrial recovery will come later than previously thought. PPI deflation is gradually getting shallower (-7.0% y/y in May). Employment disappointed on the downside, falling by 0.5% y/y and continuing the downward trend (continuous y/y negative growth) that has begun in October 2023. Excluding the pandemic, this is the worst period of employment readings since 2012/2013. Nominal wage growth in the enterprise sector in May was in line with our expectations, at 11.4% y/y, translating into real wage growth of 8.7% y/y. This time Statistics Poland did not publish detailed sector breakdown of labour market data, but we can suspect that the highest wage growth was again observed in sectors where the average wage is relatively low. More on our forecasts of wages and employment for 2024-2025 on pages 2-4.
• Consumer sentiment improved in June, in particular in terms of the perception of economic situation of the country and future economic situation of a household. At the same time inflation expectations for the next 12 months decreased - a smaller percentage of respondents believes that prices will increase quickly, but a significant proportion still believes that prices will increase at a similar pace as over the last 12 months.

THE WEEK AHEAD:

• Next week will provide a solid dose of monthly economic indicators, starting with construction output and retails sales on Monday, but the main focus will be on flash CPI figure for June due for release on Friday (details in the calendar).

NUMBER OF THE WEEK:

• 8% – core inflation in May, the lowest since July 2021.

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