Economic comment

The videoconference of NBP governor today brought a puzzling message: on one hand, Glapiński said that the change in the MPC press statement on Wednesday was absolutely meaningless and by no means signalled a change in policy bias. He also maintained his earlier claim that higher inflation is purely the effect of exogenous factors and will be transitory. On the other hand, during today’s speech Glapiński had withdrawn from many of his earlier claims, and he replaced the previous confidence that monetary policy will remain unchanged for long with the much more nuanced and conditional message. (...)

CPI surprised in April, rising to 4.3% y/y, not only due to higher than we expected rise in fuel and food prices, but also due to core component. A revision of CPI basked also played an important role. The inflation trajectory for the rest of 2021 moves higher and it is very likely now that CPI will reach 4.6% in May and even if it retraces slightly in 2H, the rest of the year will be well above the inflation target. Such scenario could be a serious challenge for the NBP’s pledge to keep interest rates unchanged until the end of the MPC term of office. Nevertheless, we think the MPC will keep its dovish narrative, claiming that inflation rise is temporary and caused by exogenous factors.

Retail sales surprised to the upside with 15.2% y/y growth in March (we expected 9.2%, market: 9.9%). Construction output at -10.8% y/y was slightly weaker than market consensus (-10.3%) and much better than we expected (-14.8%). March was quite busy for housing construction. The GDP data revisions and the most recent data about economic activity in March, taken together, suggest in our view that GDP growth in 1Q21 was stronger than we assumed earlier – possibly around -1% y/y rather than -2% y/y. This corresponds to the impressive over 1.5% q/q jump (seasonally adjusted) at the start of the year, despite the persisting pandemic and sweeping restrictions. It bodes well for GDP growth forecast for the entire 2021 and suggests that possibly our recent downward revision from 4.6% to 4.2% could have been unnecessary. April consumer and business sentiment indexes improved slightly.