TOP MACRO THEME(S):
- 2q23 marked the trough – GDP in 2q23 fell by 0.5% y/y and we expect it to be the low point of this economic downturn.
WHAT ELSE CAUGHT OUR EYE:
- Final estimate confirmed that CPI inflation fell to 10.8% y/y in July from 11.5% y/y in June. Prices fell in monthly terms for the first time since Feb. 2022. Noteworthy was the return of food price growth to the seasonal pattern. Core inflation fell to 10.6% from 11.1% in June, while its momentum decelerated noticeably, close to 0.4-0.5% m/m (sa), which brings core inflation closer to (yet still above) the NBP inflation target. At the same time our current forecast points to August inflation balancing on the edge of 10% y/y, with upside risks stemming from higher fuel prices (in line with higher crude oil prices globally) and downside risks related to faster than the seasonal pattern would suggest fall in food prices. Single-digit inflation is a crucial condition for the NBP to start interest rate cuts, as for now it seems that we may not see single-digit number till September. However, the likelihood of the cut on the next meeting (postponed to 12-13 Sep.) is high.
- Current account surplus in June was (again) much higher than expected, it stood at 2.4 bn EUR, which in terms of 12m rolling sum translated into 0.1% GDP surplus against 0.3% deficit in May. Export growth was slightly weaker than expected, 1.7% y/y vs. 3.3% y/y in May, although it still reflected the resilience of foreign sales in the automotive sector. Imports fell by 5.8% y/y against -6.3% y/y in May, while its growth was recorded only for automotive parts in line with high import-intensity of Polish exports. Joint current and capital account balance recorded a surplus of 0.3% GDP, for the first time since Nov’21. June brought another evidence that sudden deterioration of balance of payments was temporary, while further normalization of terms-of-trade and reversing inventory cycle will support its improvement.
THE WEEK AHEAD:
- Solid dose of monthly data will show the condition of the Polish economy at the start of 3q23. We expect, among others, that industrial production remained subdued accompanied by further decline in producer prices. While July most likely brought a meagre growth in employment, it was a 2nd month with real growth in wages, which should soften the fall in retail sales.
NUMBER OF THE WEEK:
- 60% – According to the NBP, approx. 60% of enterprises report a limited impact of minimum wage increase on average wage growth.