Top macro theme(s):
- The calm before the storm: CPI inflation eased somewhat in February (8.5% y/y vs 9.4% y/y in January), but it may be the lowest reading of CPI inflation this year. Despite the prolonged anti-inflationary shield, CPI inflation may enter a double-digit territory and exceed 9% on average in 2022. Policy wise, the MPC will continue rate hikes cycle until clear signs of economic.
What else caught our eye:
- The government announced measures aimed at protecting the economy from the negative impact of Russian invasion on Ukraine. Households and vulnerable natural gas recipients (preschools, hospitals, etc.) will be covered by gas tariffs to 2027. Poland will also allocate PLN 3.9bn to subsidizing fertilizer purchases by farmers. These measures reduce the risk of long-lasting pro-inflationary impact of the freeze in trade relations with Russia.
- Industrial output jumped 17.6% y/y in February with war-related demand for food and fuels boosting output by app. 1.5pp. PPI inflation declined to 15.9% y/y in February from a revised 16.1% y/y in January.
- Current account in January was nearly balanced (EUR 64m) on seasonal inflow of EU funds (1.3% of GDP, 12m). Rising prices of commodities (esp. oil) will deteriorate both trade and total C/A in the near future.
- Wage bill growth accelerated in February (to 14.2% y/y in nominal and 5.2% y/y in real terms), supportive for consumption and loans quality.
The week ahead:
- Our estimates bet on an uninterrupted activity and robust construction output expansion in February (PKOe: 18.7% y/y). An elevated retail sales turnover after the outbreak of the war (as per our card data) signals that the whole month witnessed a robust real retail sales growth (PKOe: +8.6% y/y).
- We estimate M3 money supply growth barely changed in February (PKOe: 7.5% y/y) but mortgages and consumer loans will show signs of weakness.
- Business (Tue.) and consumer sentiment (Wed.) indicators for March will be the early gauges of the impact of the war on economic activity in Poland.
- Registered unemployment rate in February may prove somewhat lower than indicated by early estimate of the labour ministry (5.5% vs PKOe: 5.4%).
Number of the week:
- 2 million – Ukrainian refugees crossed PL/UA border since Feb 24, boosting job searches intensity (see chart of the week).