Economic comment

NBP governor stunned markets today, starting the monthly conference on a very hawkish note, with a declaration that after the government’s decision to freeze energy prices until September 2025, the discussion on interest rate cuts in Poland is no longer likely in March, but may rather be postponed until October 2025. Also, the start of discussion does not warrant an immediate decision, in his view, and thus the next interest rate reduction may be delayed (again) until 2026.  (...) We have held the view for quite some time that the first NBP interest rate cut will probably take place around mid-2025, most likely in July 2025, and we still stick to this view. We think that by July it may be clear that energy prices do not have to go up in late 2025 (actually we even see a downward risk, as the wholesale prices are trending lower). We still assume that 100-125bp rate cuts are possible in 2H25
 

Polish GDP growth in 3Q was confirmed by the stats office at 2.7% y/y, compared to 3.2% y/y in 2Q. The growth structure shown by GUS is a big negative surprise. The data showed a drastic slowdown in private consumption to 0.3% y/y from 4.6% y/y in 2Q. The growth rate of investment outlays on fixed assets also practically disappeared in this period: 0.1% y/y vs. 3.2% y/y recorded a quarter earlier. This decline was compensated by an increase in inventories, which in 3Q added 3.2pp to the overall growth.
  
Detailed data on GDP do not incite much optimism about the domestic economic outlook. We think that reaching an average GDP growth at 3.0% in 2024 may be a challenge, although it is worth remembering that the first monthly data from 4Q24 (industrial production and retail sales) were better than expected, so the last quarter of the year is likely to show some acceleration.
 

Retail sales growth increased from -3.0% y/y in September to 1.3% y/y in October, 0.2pp above our forecast and 0.6pp above the market consensus. In seasonally-adjusted terms, sales increased 5.6% m/m, after declining 6.7% m/m the month before. The improvement in food sales and sales in nonspecialised shops (e.g. supermarkets), i.e. the categories responsible for the September retail sales collapse, suggests that it was a one-off rather than a sign of structural weakness. (...)