Economic comment

In October, retail sales in constant prices rose by 5.4% y/y, well above market expectations (3.8%) and our forecast (3.1%). Seasonally adjusted growth was +1.9% m/m. Sales of durable goods maintained a growth pace close to 15% y/y. In the whole 4Q, we expect 4%+ growth of real retail sales. The strong October reading may be seen as an argument for the MPC to hold off on another rate cut in December.
In 3Q25, companies employing 50 or more people recorded a 3.3% y/y increase in revenues and a 2.3% y/y rise in costs. Gross financial result rose 29.8% y/y and the four-quarter average margin moved to 4.5% from 4.3%. (...)

In October, industrial output rose by 3.2% y/y in October beating expectations for the fourth time in a row (we: 1.4%, market: 1.8%). Construction output also exceeded market forecasts, increasing by 4.1% y/y against the consensus of 0.9% y/y. Meanwhile, the average wage growth in the enterprise sector slowed to 6.6% y/y from 7.5% y/y in September, clearly below the market consensus (7.2% y/y) and our forecast (7.3% y/y). Employment in the enterprise sector fell by 0.8% y/y, in line with our and market expectations. PPI inflation was also lower than expected, dropping to -2.2% y/y against the consensus of -1.8% y/y.

Final October CPI inflation data confirmed its decline to 2.8% y/y from 2.9% in September. Full data revealed that service prices fell by 0.2% m/m for the second consecutive month, and their annual growth slowed from 5.8% to 5.6% – the lowest since November 2019. Goods prices slowed from 1.9% to 1.7% y/y. The continued deceleration in inflation was also driven by an unusual lack of food price increases. Fuel prices rose by 1% m/m, while energy prices increased by 0.6% m/m (mainly due to a 2.5% m/m rise in heating prices). We estimate that core inflation fell in October to 2.9% y/y from 3.2% previously. The next CPI reading may be around 2.5–2.6% y/y. However, such a move seems largely anticipated by the MPC, which, we still believe, will wait with the next rate cut until January.