TOP MACRO THEME(S):
- Stronger zloty = lower rates?: The MPC keeps interest rates stable, but first cuts are already looming on the horizon, as the tightening has been officially concluded. The fx channel might be essential in pushing CPI inflation down, the newest estimates show.
WHAT ELSE CAUGHT OUR EYE:
- PMI manufacturing indicator decreased significantly in June – to 45.1 pts from 47.0 pts in May. Details of the report indicate a rapid fall of new orders (especially from Germany), what results in adjustments on the production side – companies reduced production level, buying activity and were mainly processing unfilled orders. Decreasing inventories and shortening of delivery times are further evidences of a weak demand. The key finding of the June data was the continued sharp decline of input and output prices, confirming that disinflationary processes in manufacturing are intensifying.
- Unemployment rate in June fell to 5.0% from 5.1% in May (according to MinLab estimate), equalling the historic low record (5.0% in October 2019). The results are in line with our forecast and the seasonal pattern. The labour market is resilient to weak economic conditions – this will support the rebound, but might make it more challenging for inflation to return to the target.
- The value of announced foreign direct investment (FDI) in Poland in 2022 decreased to $17.8 bn (-0.4% y/y). Poland managed to maintain its high position among FDI recipients in Europe, but a deterioration in the position of the CEE region in relation to the southern EU countries (eq. Spain, Italy) and the UK is noticeable.
THE WEEK AHEAD:
- May BoP report should still show CAB surplus, however, smaller than in previous months. That does not change our view – Polish external position is improving due to terms-of-trade normalisation, reversal of inventories cycle as well as strong exports.
- Final CPI data for June should confirm fast disinflation (11.5% y/y according to flash estimate from 13.0% y/y in May).
NUMBER OF THE WEEK:
- 785 ths – number of registered unemployed in Jun’23, the lowest since Aug’90.