Economic comment

In August, both real retail sales and construction output improved their annual growth rates, although in both cases the market only expected the previous pace to be maintained and we even considered some weakening vs. July. Retail sales showed -2.7% y/y (previously -4.0%), with sales in non-specialised shops performing particularly well. Seasonally adjusted data showed the third consecutive month of rebound, this time by 1.3% m/m. Construction output accelerated to 3.5% y/y from 1.1% and showed the first m/m rebound in seasonally adjusted data, by 2.0%, after five months of declines. Housing starts also improved in August and agricultural commodity prices fell by 3.2% m/m and 18.7% y/y. The data allow us to expect that the economy's recovery from the trough has begun already in 3Q.

Industrial production fell by 2.0% y/y in August (below expectations), but July was revised upwards. The rebound in the seasonally adjusted data, +0.6% m/m, was quite modest. Employment in the corporate sector stopped growing y/y (vs. +0.1% y/y expectations) and in the manufacturing sector itself fell markedly. At the same time, wages continued their solid growth (11.9% y/y) and even accelerated in many categories. September's consumer confidence survey indicated further improvement. The series of six PPI declines in m/m terms was interrupted by a rebound in oil prices. The data favour our scenario of an economic rebound in the course of 2H23 and in 2024 pulled by private consumption.

In August, inflation fell to 10.1% y/y with goods prices decelerating to 9.8% y/y and services prices to 11.1% y/y. It seems that core inflation fell to 10.0% y/y from 10.6%. The data show low upward pressure on prices in many food categories, but also a rebound in durable goods (furniture, white goods). In our view, inflation will almost certainly drop below 9% y/y in September and should continue falling until the end of the year, reaching below 7% y/y. However, we assume that in 2024 the downward trend will no longer continue and that a rebound is possible in the second half of the year.