Poland Macro Weekly: The New Year optimism

TOP MACRO THEME(S):

Housing sales to drop in 2024 but prices may remain strong (p.2) - We expect housing sales to drop in 2024 due to end of subsidy program and relatively low purchasing power. Despite lower demand we expect housing prices to grow moderately.

WHAT ELSE CAUGHT OUR EYE:

In line with our expectations Statistics Poland revised the Dec. CPI inflation data upwards, to 6.2% y/y (vs. 6.1% y/y in flash estimate).Goods prices returned to declines (-0.2% m/m), and their annual dynamics decreased to 5.5% from 5.9% in Nov. and over 20% at the peak in Feb. 2023. Prices of services increased significantly (0.8% m/m), mainly due to the increase in transport prices.In the coming months, service prices will limit the scale of further disinflation in core inflation. This equaled 6.9% in Dec.
I.Dąbrowski (MPC) said that if the government decides to terminate anti-inflationary shields (reduced VAT on food, frozen energy prices) the NBP may consider increasing interest rates and launching a QT program. Later this week the NBP’s spokesman denied this claim, stating that there is currently no discussion on the subject, while the NBP’s Board (not the MPC) has the final say in the matter of QT. A.Soboń (NBP Board member) added that speculations about sales of bonds bought by the NBP during the pandemic are irresponsible. Meanwhile, L.Kotecki (MPC) stated that interest rate hikes would be difficult to explain and ineffective.
The current consumer sentiment index in Jan. increased to -12.6 from -15.2 in Dec., exceeding even our optimistic expectations. All components of the index increased, confirming that the minimal decline in Dec. was a one-off deviation from a solid upward trend.

THE WEEK AHEAD:

Monday will bring an accumulation of monthly economic indicators for Dec. Unfavorable calendar will further drag down industrial output, meanwhile we expect a rebound in retail sales supported by real wage growth, amid double-digit and even slightly higher nominal wage growth than in Nov. Average employment shall decline due to subdued labour demand.

NUMBER OF THE WEEK:

-6.4% y/y – PPI deflation in Dec., deeper than expected, suggesting further declines in CPI goods basket.