Economic Analysis

In today's Eyeopener:

- Today overdue data on non-farm payrolls in the USA
- Hawkish message from the October FOMC minutes
- Euro zone HICP inflation in October confirmed at 2.1% y/y
- Zloty stronger versus euro, domestic yields slightly higher

Still before the weekend, the Sejm will vote on appointing members of the Fiscal Council. After the weekend, interviews with the newly elected representatives can be expected. The next week looks very interesting. First, we will see a flood of domestic data on the economic situation in October. On Friday preliminary CPI inflation for November will be out and will be key for expectations regarding the December MPC decision – we expect CPI to slow to 2.6% y/y, the market consensus has not yet formed, but the first forecasts in Bloomberg survey are similar. Second, after the break caused by the government shutdown, more data on the US economy will appear, which may be crucial for sentiment on global financial markets (...)
 

Final October CPI inflation data confirmed its decline to 2.8% y/y from 2.9% in September. Full data revealed that service prices fell by 0.2% m/m for the second consecutive month, and their annual growth slowed from 5.8% to 5.6% – the lowest since November 2019. Goods prices slowed from 1.9% to 1.7% y/y. The continued deceleration in inflation was also driven by an unusual lack of food price increases. Fuel prices rose by 1% m/m, while energy prices increased by 0.6% m/m (mainly due to a 2.5% m/m rise in heating prices). We estimate that core inflation fell in October to 2.9% y/y from 3.2% previously. The next CPI reading may be around 2.5–2.6% y/y. However, such a move seems largely anticipated by the MPC, which, we still believe, will wait with the next rate cut until January.

Despite the high volatility in high-frequency economic data, the trend of the domestic economy appears to remain moderately positive. Our forecasts suggest that after disappointing August publications, September data will show a clear improvement across most indicators. This will be partly due to calendar effects and an exceptionally weak base – recall that in September 2024, the domestic economy was dealing with the aftermath of floods and a difficult-to-explain collapse in retail sales data. Nevertheless, even after adjusting for these effects, we should see signs of further gradual improvement in economic conditions. GDP growth in 3Q (the preliminary figure will be released in mid-November) is likely to accelerate again to 3.6–3.7% y/y, confirming that the full year may close with growth near 3.5%, possibly with a slight upside risk. (...)

In September's Rates and FX Outlook:
 

• Poland’s GDP growth failed to accelerate in 2Q16, with investments surprising negatively (-4.9% y/y), and we think that the second half of the year will see no significant improvement in economic growth. Although private consumption is likely to gain strength in the coming quarters, supported by solid labour income and the new child subsidies, it may take time until investments recover, and the positive impact of net exports will be hard to maintain (export growth may decelerate and imports accelerate). We expect a more significant investment pick-up next year, but by then the impact of the 500+ child benefit programme on consumption will be dissipating. Therefore, we forecast that GDP will grow 3.1% in 2016 and 2.9% in 2017.