Economic comment


Freeze of construction works

Economic Analysis | Economic comment

Construction output fell by 6.1% y/y in January, which was a huge miss vs. expectations (us and the market: +5.5% y/y) and December's +14% y/y. We blame the weather and assume that y/y production will soon turn positive. There have been further signs of recovery in the housing market, including a 34.0% y/y increase in building permits, but the momentum in housing completions remains negative, at -22.7% y/y. Although the main consumer sentiment indices for February surprised us slightly downwards, the key components from the point of view of the consumption outlook performed quite well and we stick to the view  that it is consumers who will kick-start the Polish economy this year.


Strong rebound in wages, weaker output

Economic Analysis | Economic comment

First part of January data from Polish economy showed much stronger than expected wage growth, weaker industrial output growth and deeper decline of producer prices. Wage growth rebounded to 12.8% from 9.6% (8.6% y/y in real terms – the fastest growth since 1H08) with strong growth especially in sectors with a high share of minimum wage earners. Output recovered to 1.6% r/r from -3.5% r/r in December (-0.2% m/m sa) mainly on working days effect, but the rebound was weaker than presumed. Detailed breakdown suggests data was a bit better that the headline would suggest. PPI growth went deeper into negative territory to -9% y/y mainly due to revision for December. (...)


Inflation fell more than expected once again

Economic Analysis | Economic comment

CPI inflation surprised to the downside in January, falling to 3.9% y/y from 6.2% in December, after 0.4% m/m price increase. Our forecast and market consensus were at 4.1% y/y and 0.5% m/m. Based on today's data, we estimate that core inflation excluding food and energy prices fell to 6.3% y/y in January from 6.9% y/y in December, against our previous estimate of 6.7%. It was core inflation that was the main source of the surprise.
We expect inflation rate to keep declining in the next two months, reaching the local bottom in March at 2.5% y/y. The scenario for the following months will strongly depend on government’s decisions regarding the anti-inflation shields. Under our assumption that the zero VAT on food will expire in March and energy price freeze will be ended in June (with a partial protection of households, limiting the scale of price increases to 20% for natural gas and 30% for electricity), we predict CPI to revive towards 7% by the end of 2024.