Economic Analysis

In today's Eyeopener

- Today we will get tot see CPI inflation in January (revised) and in February
- MPC’s Janczyk and Kotecki: rates are at a right level despite market turbulence
- President Nawrocki will veto the SAFE bill
- Market situation remains volatile, oil price back at 100$
- Weakening on the domestic FX and FI market

The war with Iran and its potential consequences remain the number one topic commanding market attention. As a result, the importance of incoming historical data releases is diminishing in the near term — the state of the economy seen in the rear view mirror matters less when a tornado has appeared on the horizon.
Nevertheless, the coming week will bring a new batch of domestic data that we will be monitoring: on Monday, core inflation for January–February and the January balance of payments; on Wednesday, March consumer confidence survey; on Thursday, wages and employment as well as industrial output and construction; and on Friday, business sentiment in the enterprise sector. (...) Abroad, it will be a week dominated by central banks. (...)

Inflation in Poland stood at 2.1% y/y in February, in line with the market consensus and 0.1 pp above our forecast. The change in CPI basket weights led to a revision of January inflation from 2.2% y/y to 2.1%, and from 0.6% m/m to 0.7%. Core inflation may have remained at its December level of 2.7% y/y in both January and February, with a chance of a slight decline in February.
CPI data for January and February should not have a material impact on the MPC’s decisions, inter alia due to uncertainty over the consequences of the war in Iran and the Council’s shift into a “wait-and-see” mode, already signalled by several of its members.

In European industry we are seeing signs of a recovery, suggesting that domestic exporters may enjoy a modest tailwind this year, not least due to the acceleration of the German economy. Domestic data confirm rising activity across most sectors. Demand for credit is clearly increasing. We continue to expect solid consumption growth to be maintained and a strong acceleration in investment. On the other hand, an exceptionally harsh winter is generating additional costs for household and local government budgets, which over time may weigh on their spending, while delays in the disbursement of funds from the Recovery and Resilience Facility mean that even the government is now pointing to the risk that grants may not be fully utilised. As a result, we keep our GDP forecast for this year broadly unchanged, with average growth at 3.9%. (...)