Economic comment

In April, Polish industrial output rose 1.2% y/y, while we and the market expected to see a small annual decline. The slowdown from 2.4% y/y in March was to be expected due to the later date of Easter this year compared to 2024. April's industrial data, if confirmed by another strong reading in May, could be seen as a long-awaited change in the sector. Moreover, today’s figures pointed to an improvement in May's consumer confidence and labour market. Corporate wage growth rebounded to 9.3% y/y in April from 7.7% y/y in March, clearly above the market consensus at 8.1% y/y and our estimate at 8.4% y/y. The data published today surprised on the upside, which supports our forecast that GDP growth will remain solid in the coming quarters and may even accelerate compared to 1Q25 (3.2% y/y). At the same time, the strong numbers, especially those on wages, may reduce the willingness within the MPC to cut more strongly

In 1Q25, Poland’s GDP growth slowed to 3.2% y/y, in line with the median of market forecasts, and seasonally adjusted data showed a higher-than-expected rise by 3.8% y/y and as much as 0.7% q/q. This indicates that the slowdown in economic activity at the beginning of the year was not as significant as suggested by the monthly production and sales data published earlier, probably thanks to still high activity in services. The final CPI inflation data showed a decline to 4.3% y/y, slightly smaller than reported in the preliminary data (4.2% y/y). The detailed data suggest a moderation in core inflation in April to 3.5-3.6% y/y. Overall, today’s set of information does not significantly alter the economic scenario for the coming quarters, but it supports a cautious approach to further monetary easing (just like the 1Q wage data released last week which still showed double-digit growth, 10% y/y).

The tone of the NBP president’s conference today was definitely less dovish than in April. Glapiński emphasized that the MPC has only one objective in mind: to stabilise prices, and that the fight to lower inflation has not been won yet. He also said that the rates have been adjusted to the lower inflation level, just like in the autumn 2023, and that such an adjustment does not imply a beginning of a monetary easing cycle (...) Overall, we keep the view that in June the MPC will keep interest rates on hold and will deliver 25bp rate cut in July, when the new NBP projection will be available. We also see growing possibility of another 25bp cut at the subsequent MPC meeting, in September, in reaction to a very likely significant drop in inflation below 3.5%, which will be visible in the CPI data available at that meeting.