Economic Analysis

In today's Eyeopener:

- Today Germany’s ZEW index and US housing market data
- Core inflation in February came in at 2.5% y/y, below expectations
- The current account balance in January surprised with a surplus
- Minor fluctuations in the zloty, domestic bonds strengthened

The war with Iran and its potential consequences remain the number one topic commanding market attention. As a result, the importance of incoming historical data releases is diminishing in the near term — the state of the economy seen in the rear view mirror matters less when a tornado has appeared on the horizon.
Nevertheless, the coming week will bring a new batch of domestic data that we will be monitoring: on Monday, core inflation for January–February and the January balance of payments; on Wednesday, March consumer confidence survey; on Thursday, wages and employment as well as industrial output and construction; and on Friday, business sentiment in the enterprise sector. (...) Abroad, it will be a week dominated by central banks. (...)

Inflation in Poland stood at 2.1% y/y in February, in line with the market consensus and 0.1 pp above our forecast. The change in CPI basket weights led to a revision of January inflation from 2.2% y/y to 2.1%, and from 0.6% m/m to 0.7%. Core inflation may have remained at its December level of 2.7% y/y in both January and February, with a chance of a slight decline in February.
CPI data for January and February should not have a material impact on the MPC’s decisions, inter alia due to uncertainty over the consequences of the war in Iran and the Council’s shift into a “wait-and-see” mode, already signalled by several of its members.

This was supposed to be a very good year for the Polish economy, with GDP growth close to 4%, the peak of the investment cycle, resilient consumption and a strong labour market, inflation stabilising close to the NBP’s target, and slightly declining interest rates. We still see a chance that this scenario will materialise, although its success depends to a large extent on how persistent the disruption in commodity markets triggered by the US-Israeli attack on Iran proves to be. Since the beginning of the decade, the global economy has been fighting one battle after another, grappling with, among other things, the global pandemic, the energy crisis, rising geopolitical instability, a wave of economic protectionism, volatility in financial markets, and now a severe disruption in commodity markets. (...)