• The economy is turning the corner: Monthly economic activity indicators for April-June confirm that GDP in 2q23 declined in y/y terms for the second quarter in a row, amid deepening consumer recession, moderate growth of fixed investment and resilient exports. At the same time, the most recent data for June suggest that the Polish economy has turned the corner and enters a recovery path, to be driven mostly by a rebound in consumption.


  • MPC’s talk on NBP rate cuts is getting louder as a few rate-setters (including NBP governor) said that the first move could be made already this year. Some of them indicate it could take place even before the release of the new NBP projection in November, if CPI inflation becomes single-digit and there is clarity on strong disinflationary trend going forward. We assume the first rate cut in October, but do not exclude the MPC will start trimming rates already in September (if CPI inflation declines below 10% y/y in August).
  • Key measure of core inflation (CPI less food, energy and fuel) declined to 11.1% in June. While core inflation momentum strongly decelerated in recent months (0.6% m/m sa in June vs peak of 1.2% m/m sa in late 2022), it is still much above the level (0.2% m/m sa) needed to reach the inflation target. It is noteworthy that for the first time since the outbreak of the war in Ukraine one of core inflation measures (CPI excl. the most volatile items) showed a monthly decline of prices by 0.1%. Disinflation is gaining strength.
  • There are also some other good news on the inflation front. Deputy MinFin A.Sobon said the government would consider extending the reduced VAT rate on food into 2024. Meanwhile, the main gas supplier for retail customers anticipates to keep gas prices the next year at the current level (frozen by the government). Prolonged 0% VAT rate for food and flat gas prices create a downward risk to our CPI forecast for 2024, thus we put it under revision.


  • Not much food for thought locally due this week: data on registered unemployment and monetary statistics for June.


  • 10 months – long period of real decline in corporate wages in Poland, eventually interrupted in June 2023.
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