Poland Macro Weekly: Last inflation reading within the target in 2024

TOP MACRO THEME(S):

Housing market in a long-unseen balance (p. 2) – We expect sales and prices growth to slow down in the coming year as the new government program that was announced to start in July is in question and there are no NBP rate cuts on the horizon.

WHAT ELSE CAUGHT OUR EYE:

CPI in June inched up to 2.6% y/y, in line with our estimate and a bit above consensus pointing to stabilization at 2.5% y/y. Monthly price increase was 0.1% m/m with stronger than expected food price growth (0.7% m/m) largely offset by fall in fuel prices (-2.8% m/m). Average CPI inflation in 2q24 was 0.9pp lower than in NBP projection in March. However, already in July CPI inflation will leave the tolerance band of deviations from the target due to partial unfreezing of energy prices, resulting in average electricity and natural gas bill increasing by approx. 20%, which should add around 1.5pp to the headline inflation rate.
Retail sales in May increased by 5.0% y/y in real terms, slightly stronger than expected. Construction output in May fell by 6.5% y/y, in line with our expectations. Monthly economic indicators (also industrial output) for April-May imply an acceleration of GDP growth in 2q24. Our nowcast stands at slightly below 3.0% y/y (against 2.0% y/y in 1q24), but it may be even higher and closer to our forecast at 3.6% y/y as we believe that services consumption (not covered by any monthly data) performs even stronger than goods sales.
Industrial orders in May fell by -9.9% y/y against -0.9% y/y in April, but after adjusting for calendar effects orders were close to a stabilization, giving hope for a recovery in industry.

THE WEEK AHEAD:

The week ahead will start with PMI manufacturing for June. Later in the week the MPC will take centre stage, but do not expect any revelations as Polish central bankers are not in mood for any change in monetary policy parameters any time soon (definitely not before end-2024). However, the new NBP projection for GDP and CPI inflation will be an interesting reference point for considerations regarding resumption of NBP rate cuts in 2025.

NUMBER OF THE WEEK:

35 out of 56 – the number of investment projects under the Recovery and Resilience Facility that have been launched in Poland.