Poland Macro Weekly: Inflation seems to be losing steam

Inflation seems to be losing steam: CPI inflation in July rose to 15.6% y/y but in m/m terms was the weakest since August 2021. Inflationary trends seem to be losing steam and MPC seems to be losing arguments in favour of further hikes.

The average wage in the national economy in 2q22 grew by 11.8% y/y, weaker than in the enterprise sector (13.5% y/y), the tightest segment of the labour market. Despite high nominal growth, real wages in 2q22 declined both in the corporate sector (by 0.4% y/y) and in the national economy (by 2.1% y/y, the first decline since 2012). Wages nominal growth rate has most likely peaked in 2q22 as the ongoing economic slowdown will reduce wage pressures and prevent a price-wage spiral. This means that even deeper decline in real wages should be expected. While it has a negative impact on consumer sentiment and spending it is worth to recall, that tax changes introduced in 2022 are positive for disposable income and should reduce the negative impact of high inflation on real income. The ongoing economic slowdown will reduce wage pressures and prevent a price-wage spiral.
C/A deficit in June barely changed (EUR 1.5 bn), indicating that 12-month rolling C/A deficit hit 3.9% of GDP. That said, the scale of C/A deterioration visibly slowed pointing at turning point ahead (around 3q/4q22).

GDP growth in 2q22 slowed down in our view to 7.4% y/y with still high “carry-over” effect but with risks skewed to the down side. Data for July should confirm that the industrial sector is slowing down (PKOe: 6.5% y/y), which will likely put some pressure on employment. Don’t get misguided by wages (PKOe 14.9% y/y) which will be likely boosted by some extra payments in the mining sector (one off). July core inflation increased only marginally, to 9.2% y/y from 9.1% y/y, on our estimate.