Economic comment

Today’s broad set of data brought mixed feelings, mostly surprising us by moving in the opposite direction to expectations. The figures suggest downside risk for investment and GDP growth forecasts in 4Q25, but for now we maintain our GDP growth forecast at 3.9% y/y. The entire data set supports our view that the MPC will hold off on another rate cut until March. Wage growth in the enterprise sector accelerated to 7.1% y/y in November from 6.4% y/y in October, contrary to expectations of further slowdown to 6.2% y/y. Industrial output broke its good streak and contracted by 1.1% y/y in November, a disappointing result after strong readings in the previous two months. In construction, output was also weaker than expected, rising only 0.1% y/y. (...)

With Christmas approaching, we decided – with a touch of humour – to take a closer look at the cost of organising this year’s festive celebration. We identified two main cost components of Christmas: the Christmas Eve and holiday gathering at the table, and gifts. For each of these factors, we built a price index to reflect changes in their cost. The indices were constructed based on GUS inflation data, our bank’s card spending data, survey results, anecdotal information and expert knowledge.

Our indices show that festive food will be 2.4% more expensive y/y, and gifts 2.6% y/y – which, compared with income growth of 9.4% y/y, means the strongest increase in purchasing power in years and thus potential for higher spending. These could be prosperous holidays.

November CPI inflation was revised up to 2.5% y/y from 2.4% y/y. In our view, this change resulted from a slight upward adjustment in core inflation estimates, though it was a minute change and, according to our calculations, the flash reading was already on the borderline between 2.4% y/y and 2.5% y/y. We estimate core inflation at 2.7% y/y. Service price inflation fell to 5.3% y/y from 5.6% y/y, while goods inflation declined to 1.4% y/y from 1.7% y/y.
We believe CPI inflation may edge up slightly in December, supporting the MPC in its “wait-and-see” stance, before falling towards 2% in the first half of 2026, which would give the Council an incentive to cut rates to 3.50%.