Economic Analysis

In today's Eyeopener:

- Today data on business sentiment, retail sales and money supply
- NBP report: banking sector stable, credit market set to grow
- Slightly weaker-than-expected data from the US
- Mild upward correction on EURPLN, bond yields continue to fall

The last days of this year and the beginning of the new one should be relatively calm for the economy and financial markets. The number of economic publications will be limited, although that does not mean that nothing interesting will show up: on Monday, 22 December, we will get data on business sentiment, retail sales and money supply, and on Tuesday, registered unemployment and the GUS Statistical Bulletin; on Tuesday, 30 December, quarterly balance of payments data will be released, on New Year’s Eve preliminary CPI inflation data for December, and on Friday, 2 January, the manufacturing PMI for December. (...)

Retail sales rose 3.1% y/y in November, slightly below market consensus and our forecast – both at 3.9% y/y. Seasonally adjusted sales increased by 1.1% m/m and 5.5% y/y, which is a solid result, only marginally below October’s 5.6% y/y rise, and confirms, in our view, that consumer demand remains quite strong. The growth rate of durable goods sales stayed very high, close to 15% y/y. We expect moderately fast growth in private consumption to continue in the coming quarters, with a stable contribution to GDP growth. December’s deterioration in business sentiment in industry was accompanied by improvement in transport, construction and retail trade. In November, agricultural product prices fell sharply, creating room for further easing in food price growth in CPI in the coming months.

Recent positive data from the domestic economy have sparked a wave of optimism about the prospects for economic growth in Poland. For us, this optimism is nothing new. We wrote about the fact that the coming years would be marked by strong investment growth and that 2026 would be better than 2025 in terms of GDP growth before it became trendy. At the same time, it is worth bearing in mind that these will not be easy years, free from uncertainty, and that the acceleration in domestic growth will be moderate rather than spectacular. In our opinion, the increasingly popular slogan ‘GDP at four plus’ will materialise more likely in the form of nominal GDP level exceeding PLN 4 trillion, rather than in the form of average real GDP growth for the entire year above 4% (although this may not be far off) (...)

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.