Economic comment

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.

November's data from the economy brought a positive surprise from the labour market with a slightly smaller decline in employment and higher wage growth than expected. Construction production performed quite well, although it still shows declines close to 10% y/y. Industrial production has once again confirmed that after a strong result in one month, weakness in the next is to be expected rather than a continuation of the rebound. In its new reading, the only thing that is pleasing is that not all of October's spectacular rebound m/m was offset by November's weakening. Data from the housing market suggest an increase in the number of dwellings completed next year, current market activity remains at a solid level. PPI inflation rose to -3.7% y/y, as we expected.

Final CPI data showed prices rising 0.5% m/m and 4.7% y/y in November, i.e. +0.1pp higher than in the flash print. The details revealed surprisingly strong increase in prices of communication (+1.8% m/m), clothing and footwear (0.5% m/m) and smaller than we anticipated prices in recreation and culture (-0.3% m/m), alcohol and tobacco (-0.1% m/m) and “others”. Today’s data reinforce our view that the MPC will keep interest rates on hold in 1H25 and we still keep July 2025 as the most likely moment of the next interest rate cut.