TOP MACRO THEME(S):
- July was still on holiday mode – Monthly data show that the start of 3q23 was slightly disappointing, however, posing no threat to expected economic rebound.
WHAT ELSE CAUGHT OUR EYE:
- M3 aggregate increased in July by 8.0% y/y, faster than in June. Volume of mortgage loans increased m/m for a 2nd consecutive month, while the scale of its yearly fall declined pointing to a turning point in the credit market.
- Despite economic downturn, 2q23 brought higher profitability of nonfinancial enterprises, which increased to 6,0% against 4,6% in 1q23. Biggest improvement was observed in the case of an IT sector (+6.2pp y/y) and HoReCa (+3.4pp y/y). Profitability declined in manufacturing (by 0.7pp y/y), however, it was higher than in 1q23 which makes us believe that the worst is behind this sector. Investment of large enterprises (50+ employees) in 2q23 increased by 13.6% against 7.2% in 1q23, which we link to accelerating energy transition of the Polish economy, high accumulated profits and easing of supply chain disruptions in the automotive sector.
- According to a draft of Budget Act for 2024, central budget deficit in 2024 should stand at 4.5% GDP against 2.7% GDP planned in 2023. This does not change our forecast for the overall fiscal balance (ESA) of fiscal deficit at 4.8% GDP in 2023 and 4.0% GDP in 2024, considering announced plans of reducing spending from off-budget funds and usually lower than planned implementation of budget expenditures in previous years. The budget deficit in the Jan-Jul period amounted to PLN 13.1 billion, little changed since June. The data indicate growing debt servicing expenses (PLN 50.1 bln in the last 12 months) and a slow rebound in the dynamics of VAT and PIT revenues (12 months rolling window) with a steady decline in CIT revenues growth.
THE WEEK AHEAD:
- Most important data next week will be the flash estimate of CPI inflation in August. We see inflation right on the edge of 10%, however, available data suggest that both food and fuel prices may be a source of surprise. 2nd estimate of GDP in 2q23 will bring information on its structure, though it is widely expected that consumption was the weakest component. PMI will likely show a turning point.
NUMBER OF THE WEEK:
- 20.0% – y/y increase in investment in machinery and equipment among big enterprises (50+ employees) registered in 2q23, the highest since 2014.