Economic Analysis

In today's Eyeopener:

- Today preliminary Polish CPI data for October
- ECB left interest rates unchanged
- Poland’s main ESI sentiment indicator down due to weaker consumer confidence
- Slight weakening of the zloty, domestic bond yields slightly higher

We will start the new week with a series of PMIs measuring October’s manufacturing activity in Poland, European countries, and the USA. We expect the Polish index to continue its gradual recovery and show a level slightly above 48 pts, still below the neutral threshold of 50 pts. In addition to the PMI, Polish macro data will be complemented on Friday by Eurostat figures on services production in August. Probably by the end of the week we will also learn preliminary data from the Ministry of Labour, Family and Social Policy on registered unemployment in October – here we expect the unemployment rate to stabilise at 5.6%. For market participants, the most important event of the week will undoubtedly be the MPC meeting starting on Tuesday. The Council’s decision will be announced on Wednesday afternoon, and the press conference of NBP Governor Adam Glapiński will take place as usual the next day, Thursday.

Today's data proved slightly worse than expected. Retail sales rose by 6.4% y/y in September, slightly slower than our forecast (7.3% y/y). Seasonally adjusted figures showed a decline of 0.6% m/m. The business confidence survey for October showed an improvement in sentiment among a large portion of companies, while the consumer survey was somewhat disappointing after the strong optimism seen in September. The NBP survey of companies also indicated a slight improvement in business conditions in the past quarter. The final element of the morning's data was the agricultural product purchase price index, which recorded a decline in growth to 9.8% y/y in September from 11.8% y/y in August. Despite the weaker-than-expected sales reading, we still believe the outlook for private consumption remains good (...).

Despite the high volatility in high-frequency economic data, the trend of the domestic economy appears to remain moderately positive. Our forecasts suggest that after disappointing August publications, September data will show a clear improvement across most indicators. This will be partly due to calendar effects and an exceptionally weak base – recall that in September 2024, the domestic economy was dealing with the aftermath of floods and a difficult-to-explain collapse in retail sales data. Nevertheless, even after adjusting for these effects, we should see signs of further gradual improvement in economic conditions. GDP growth in 3Q (the preliminary figure will be released in mid-November) is likely to accelerate again to 3.6–3.7% y/y, confirming that the full year may close with growth near 3.5%, possibly with a slight upside risk. (...)

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.