Economic comment

Industrial output increased by 1.1% y/y in January versus 3.8% y/y in December, somewhat stronger than we expected (-0.1% y/y). The seasonally adjusted data showed an acceleration to 3.5% y/y from 2.1% y/y. Exporting sectors were doing quite well. Still, the data are signaling further economic slowdown in 1Q20, in our view. PPI growth declined from 1% y/y to 0.8%.

Corporate wage growth accelerated to 7.1% y/y with the minimum wage hike possibly adding 1 pp, and underlying momentum most likely remaining robust.  Corporate employment rose in January by 1.1% y/y, less than expected, but note that the January data is under strong effect of change in the statistical sample. In our view, however, the demand for labour in Poland is weakening and this should also rein in the wage growth in the months to come. The accelerating inflation is consuming a large part of higher wage growth and this is translating into falling consumer confidence. In our view, the labour market and consumer confidence numbers are in line with a further slowdown in private consumption in 1Q2020.

Inflation rate climbed to 4.4% in January, higher than we expected. The jump was partly explained by prices of food and energy, but not entirely, as according to our estimate core CPI ex food and fuel rose to 3.3-3.5% y/y. At the same time, flash GDP data confirmed that the economic growth slowed substantially to 3.1% y/y in 4Q19. We think that the data will not change substantially the Polish central bank’s rhetoric – the MPC will keep arguing that the slowing economy makes the inflation’s rise unlikely to be persistent.