Economic Analysis

In today's Eyeopener:

- Today, data on retail sales and M3 supply
- General government deficit at 7.3% of GDP in 2025
- GUS business sentiment indicators lower in April
- The zloty slightly stronger, the bond market weaker despite stabilisation in core markets

Key March economic activity data are coming this week. On Tuesday, we will see wages and employment, as well as industrial and construction output and producer prices. The picture will be completed retail sales and money supply data on Thursday, GUS Statistical Bulletin on Friday. March was the first month of the year in which weather conditions allowed producers and construction companies to operate normally, so we expect a clear rebound in their performance (...)

March retail sales surged by 8.7% y/y, significantly outperforming even our optimistic forecast of 7.5% y/y (market consensus stood at 5.7% y/y), and accelerating from 5.0% y/y in February. This marks the strongest annual growth in retail sales since April 2022. In our view, March’s exceptionally strong outturn was supported by several one-off factors, so April is likely to bring a worse reading. In April, consumer confidence worsened significantly for the second month in a row on growing worries, but it does not look like growing fuel prices forced consumers to reduce spending. The decline in producer prices of basic agricultural products deepened in March to –11.5% y/y, from –9.9% y/y a month earlier.

In mid‑March we published a report outlining three scenarios for the development of the economic outlook, depending on how prolonged and severe the commodity shock triggered by the war in Iran would prove to be. Three weeks later, we can conclude that the first scenario, which we had then considered the most likely, turned out to be overly optimistic, and the baseline scenario is shifting towards scenario number two: the conflict does not escalate further, but prolonged uncertainty and the damage already inflicted on infrastructure mean that commodity prices may remain at least 15–20% above their February levels for most of this year. Recent reports about an agreement on a two‑week ceasefire are interpreted by us as a clear signal that neither the US nor Iran is interested in further escalation or a prolongation of the war. (…)