Economic Analysis

In today's Eyeopener:
  
- Today Polish retail sales for November, US consumer spending and sentiment, PCE inflation
- Wages, employment and construction output stronger than expected, decline in industry
- Zloty even stronger, market rates rebounded higher

We are entering a holiday period, when the number of new publications will be very limited, just like the financial markets’ activity and liquidity. The local calendar will include data on the November money supply and the new GUS’s Statistical Bulletin on Monday, and the next important data will be released just after the New Year: manufacturing PMI on January 2nd, and flash CPI inflation for December on January 3rd. Abroad the calendar is also relatively light, including data from the US on consumer confidence, home sales, durable goods orders; and at the start of January, preliminary PMI indexes for many countries will be released. (...)

In November, retail sales increased by 3.1% y/y in real terms, above 1.3% y/y recorded in October. The result significantly exceeded both our forecast of 0.5% y/y and market expectations (0.8% y/y). This is the second consecutive positive surprise. We consider it as proof that the underlying trend of domestic consumption remains robust, and it provides support for our claims presented in our last MACROscope that the poor consumption results in 3Q24 were only a temporary deviation from its growth trend, not a structural change. The December GUS economic survey did not show any radical changes in sentiment and does not change our view on the generally positive economic outlook for Poland. In November, the purchase prices of agricultural products increased by 1.7% m/m and it was the fourth consecutive month of growth.

Based on the currently available data, we can say that the economic scenario that materialized in 2024 was close to the one we sketched out a year ago. Despite the unfavourable external environment and the protracted downturn in the euro area, the domestic economy returned to GDP growth of around . 3%, mainly due to robust domestic demand, including consumption, supported by rapidly rising household incomes. The results for the third quarter were a big disappointment, but we consider them a temporary disruption of the trend, not a signal of its fundamental change. We are still not able to explain exactly what was behind the sudden slump in demand in 3Q, but we do not share the opinion about the "death of the consumer" (if anything, it was only resting) and in the coming quarters we expect the pace of economic growth to return above 3%, with further significant contribution from domestic consumption.  (...)

In September's Rates and FX Outlook:
 

• Poland’s GDP growth failed to accelerate in 2Q16, with investments surprising negatively (-4.9% y/y), and we think that the second half of the year will see no significant improvement in economic growth. Although private consumption is likely to gain strength in the coming quarters, supported by solid labour income and the new child subsidies, it may take time until investments recover, and the positive impact of net exports will be hard to maintain (export growth may decelerate and imports accelerate). We expect a more significant investment pick-up next year, but by then the impact of the 500+ child benefit programme on consumption will be dissipating. Therefore, we forecast that GDP will grow 3.1% in 2016 and 2.9% in 2017.