Economic Analysis

In today's Eyeopener:

- Today Statistical Bulletin for September, consumer sentiment for October
- Surprising and difficult to explain slump in retail sales in September
- High general government deficit in 2Q
- The Council of Ministers passed a bill on the Fiscal Council
- Weak risk appetite, but zloty stable, steepening curves

This week, a large package of data from Poland is due: on Monday industrial output, construction output, labour market figures and PPI inflation, on Tuesday retail sales, M3 money supply, business sentiment indicators, on Wednesday consumer sentiment, unemployment rate and the Statistical Bulletin. Thus, in a few days, we will have almost a full set of data from 3Q24, which will allow us to reassess our forecast that the GDP growth will remain above 3% y/y.  (...) There will also be a lot of interesting information globally. From the USA, we will get to see the Conference Board and Michigan business sentiment indicators as well as data on durable goods orders. In Germany – Ifo and PPI inflation. In addition, preliminary PMI indexes for major economies will be published. (...) Decisions on interest rates will be made, among others, in China, Hungary, Canada. (...)

The growth rate of retail sales unexpectedly dropped in September to -3.0% y/y from 2.6% y/y in August, well below the consensus of 2.2% y/y and our forecast of 2.5% y/y. In seasonally-adjusted terms sales fell 6.7% m/m after advancing 1.9% m/m in August. The main source of the negative surprise seems to have been food, whose dynamics plunged from -0.4% y/y to -7.6% y/y. Although the decline in retail sales in September will most likely negatively affect 3Q GDP results, the weakening of consumption should only be temporary, and - given the strong growth of wages and the historically low unemployment – likely does not reflect structural effects. Business sentiment indicators showed an improvement in most sectors in October, in particular in the retail sector. In September, the prices of agricultural products increased by 2.2% m/m and it was the strongest increase since September 2022.

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.