Economic Analysis

In today's Eyeopener:
 
- Today US labour market report for September
- Glapiński: 2Q is the optimal moment to start rate cuts
- Eurozone services PMI revised to the upside, strong rise of US services ISM
- Further PLN weakness, local FRAs down on NBP president’s comments

The domestic economic calendar for the coming week is completely empty. On Tuesday, the government is expected to work on the medium-term budget and structural plan for 2025-2028, i.e. a fiscal consolidation plan that is expected to allow Poland to exit the excessive deficit procedure (EDP). On Wednesday, the session of the Sejm begins, with the first reading of the draft budget bill for 2025 and, most likely, the draft bill will be send to committees. Work on the budget in the parliament will probably last until the end of this year.
As usual, in the week following the MPC meeting, we can expect new comments from the Council members, which may shed some new light on the prospects for interest rate cuts in 2025. (...)

In the second half of September, Poland suffered due to flood. Impact of this natural disaster on the economy is complex and transmitted through multiple channels. We have decided to investigate a small part of this problem by estimating the flood’s impact on current consumption of households. (...) Our results suggest that although the impact of the flood on individual towns or even powiats (middle-level units of local government) was significant and caused a decrease in expenditure by up to several dozen percent, on a national scale this effect was insignificant – in our opinion, domestic consumption on average may have decreased in September by about 0.0-0.5% compared to the counterfactual scenario without the flooding (although we would rather say the effect was more likely to be closer to 0.0% than to 0.5%). This is not enough to consider correcting the forecasts for retail sales or private consumption.
 

In August, global financial markets went through a short-lived but quite sharp correction, driven by renewed fears of recession in the US, triggered by weaker labour market data. In our assessment, the baseline scenario for the global economy is still a soft landing: a mild and controlled deceleration in the US, a slow recovery from the bottom in the euro area, a structural slowdown in China. (...) Despite the challenging external environment, the Polish economy is reaccelerating in line with the scenario we have been predicting for a long time. In 2Q24 Poland recorded the fastest GDP growth in the entire EU and was the only country in the CEE region to surprise with a positive result, showing great resilience to the protracted downturn in Germany. (...) 

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.