Economic Analysis

In today's Eyeopener:

- July PMIs showed weakening of new orders and production in many countries
- In Polish manufacturing strong pressure on supply chains and costs persists
- Zloty keeps strengthening, EURUSD did not retrace after last week's rise
- Bond yields lower globally

The intensity of news flow from main economies will go down in the upcoming week, giving markets time to mull recent information: it seems that the Fed is making the shift towards policy normalisation very gently in order not to surprise the markets, global inflation pressures are not giving in – flash readings in July surprised to the upside, 2Q GDP growth in USA and Germany was worse than expected. We will get to see PMI readings for July, but we already saw flash estimates, so space for surprises is limited (...)

Retail sales advanced by 8.6% y/y in June, roughly in line with forecasts (we: 7.6%, market: 9.0%). Retail sales volume is still below pre-pandemic trend, but we are positive about sales and private consumption in the months to come, as households’ disposable incomes remain strong and consumer confidence is improving. Construction output rose by 4.4% y/y in June, below expectations (we: 7.0%, market: 6.8%). In seasonally-adjusted terms output declined by 1.5% m/m. Despite this disappointment we remain fairly positive about construction output in the months to come given full orders books of construction companies, strong growth of house starts and building permits in the housing sector and the upswing in investment. 

This is yet another year on a forecasting rollercoaster: In just a few months we have moved from worries about the 3rd wave of Covid-19 and downward forecast revisions to re-opening economies, growing optimism and a rise of GDP forecasts, now back to increasing fears of the 4th wave; from an unusually cold April-May to a super-hot June; from NBP rate cut signals at the start of the year to rising rate hike expectations. The only area where the direction of forecasts has not changed, at least until recently, is inflation: CPI growth almost doubled since December’s 2.4% y/y until May, with analysts’ expectations for both 2021 and 2022 steadily moving up. (...)

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.