Economic comment

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.

Industrial production recovered in June more than expected, to +0.3% y/y from -1.6% y/y, above market and our expectations, with seasonally-adjusted growth of 1.3% m/m. Improvement was recorded especially in sectors focused on the domestic market and on consumer goods. Wage growth weakened in June to 11.0% y/y from 11.4% y/y, contrary to forecasts betting on an acceleration. 

All in all data are quite positive and support our moderate optimism about industrial outlook in 2H24. As the labour market situation remains fairly positive and the economy accelerates, we assume that wages will continue to grow at a two-digit pace which – despite the rebound in inflation – will still yield a high real growth of households’ incomes. Today’s numbers do not change our view that the MPC will start the rate cutting cycle relatively late, at earliest in mid-25, but were good enough to trigger an upward correction in market rates.
 

GUS confirmed the increase in CPI inflation to 2.6% y/y in June from 2.5% y/y in May. The slight increase was mainly due to a stronger increase in food prices from 1.6% y/y to 2.5% y/y after a monthly rise by 0.7% m/m. Increases in inflation rates were recorded for most major categories of food products. The growing price momentum may be the result of several overlapping effects, including the ongoing drought in Poland, global price increases (reflected by rising FAO indexes), or further impact of the April VAT increase on food prices. Energy prices fell by 0.1% m/m in June, so they were not very important from the point of view of changes in the inflation rate. According to our estimates, prices in core categories increased by c. 0.2% m/m and core inflation amounted to 3.7% y/y vs. 3.8% y/y in May. (...)