Economic comment

Retail sales advanced by 8.6% y/y in June, roughly in line with forecasts (we: 7.6%, market: 9.0%). Retail sales volume is still below pre-pandemic trend, but we are positive about sales and private consumption in the months to come, as households’ disposable incomes remain strong and consumer confidence is improving. Construction output rose by 4.4% y/y in June, below expectations (we: 7.0%, market: 6.8%). In seasonally-adjusted terms output declined by 1.5% m/m. Despite this disappointment we remain fairly positive about construction output in the months to come given full orders books of construction companies, strong growth of house starts and building permits in the housing sector and the upswing in investment. 

Industrial output rose by 18.4% y/y in June, roughly in line with expectations (we: 19.0% y/y, market: 18.0% y/y). Decline in annual growth rate vs May (29.8% y/y) was caused mostly by base effects. We are expecting industry to remain strong in the months to come, yet the annual growth rate will go further down as the statistical base effect from the first coronavirus wave diminishes. PPI inflation climbed to 7.0% y/y, in line with our expectations and reached the highest level since January 2012. Cost pressure in companies is clearly rising and this will be feeding in the CPI, in our view.

The June CPI was confirmed at 4.4% y/y. The decline vs the May print (4.7% y/y) results mainly from the changes in transport and telecommunications prices. We estimate that the core CPI declined to 3.5-3.6% y/y and was likely the lowest in one year. The detailed data on inflation will be published by NBP on 16 July. In our opinion the CPI has peaked this year in May, while will remain near 4.5% in the coming months which should be becoming less and less convenient for the MPC as the time passes.