Economic Analysis

In today's Eyeopener

- Today US numbers on PCE inflation, personal incomes and spending
- Slight decline of synthetic GUS business climate indicator
- Deputy NBP governor M. Kightley: higher energy prices can elevate inflation expectations
- US GDP advanced by 2.8% q/q in 2Q24, strongly above expectations
- Recovery of CEE currencies, decline of market rates

Next week will be abundant in important data from abroad, but it will also bring a few important domestic releases: the flash estimate of July CPI inflation (Wednesday) and a new print of the manufacturing PMI (Thursday). We expect that due to the increases in electricity and gas bills CPI inflation most likely not only strongly rebounded in July, but also, after five months of remaining in line with the inflation target, returned above its upper limit – in our view, slightly above 4,0% y/y. (...) The releases from abroad will include the first estimates of GDP growth in the euro area, as well as in Hungary and Czechia in 2Q24 (Tuesday). Although they will not yet show breakdowns into the main aggregates, they will provide a first indication of Europe’s economic condition over the last quarter. (...) The main event in the US will be the policy decision of the FOMC on Wednesday. (...)

Retail sales disappointed in June and grew by 4.4% y/y. Annual growth rate was dragged lower by non- and semi-durables. However, durable goods advanced, which we view as a positive signal. (...) In June, construction output declined by 8.9% y/y and was weaker than expected.  All in all, though the latest data do not look overly optimistic, we think that its mid to long term outlook remains positive, e.g. thanks to the inflow of EU funds. (...) Quarterly averages of monthly activity indicators support our estimate of acceleration in GDP growth in 2Q to c. 3%. Weakness in retail sales and construction was offset by earlier release of better than expected data for industrial production, which is why the July set of economic activity data does not change our growth estimates.

No, Poland will not become the European champion in football, but in terms of GDP growth in the next two years it should be among the leaders. We certainly have a chance for the first place in 2025 when it comes to the lowest unemployment and the highest inflation. A high fiscal deficit will also place us close to the top of the EU.
Despite the exceptionally high volatility visible in high-frequency data, in our opinion the Polish economy remains on the path of gradual economic recovery. Exactly a year ago we put forward the hypothesis that the economy is at a turning point and GDP growth in the second half of 2023 should start to recover, accelerating to about 3% in 2024. In retrospect, we think that this was actually a good call and a scenario, assuming the leading role of consumption in this year's economic recovery, but also a break in the downward trend in industry, remains valid. (...)

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.