What else caught our eye:
- Core inflation stood at 3.9% y/y in April amid other measures rising to 2.8%-4.0% y/y (from 2.6-3.9% in March). PPI inflation in April shot up to 5.3% y/y but core PPI inflation inched down to 1.8% y/y, from 2.5% y/y in March. That said, supply bottlenecks should simmer inflationary pressures further.
- The state budget surplus after April hit PLN 9.2 bn, reflecting a jump in revenues (strong rebound of the nominal GDP) as well as shifts of some spending (incl. transfers to the Social Security Fund, FUS) to the off-budget entities. MinFin T.Koscinski also acknowledged that the state budget may use the fiscal space available in 2021 and shift some of its future expenses into this year (as was the case in 2020).
- Despite R.Sura comments on the possible need for a rate hike in November, we don’t think other moderate MPC members might support it. G.Ancyparowicz, C.Kochalski have confirmed this week, that their baseline scenario (flat rates for long) remains intact. They suggested the NBP should first taper its QE program before any moves with interest rates.
- Construction output in April declined by 4.3% y/y, suffering from pandemic labour shortages and less investment of local govt. Construction was one of a few sectors that worked ‘normal’ last year so there is no base effect in the data. That said, we see improvement of construction activity ahead.
- Employment in April increased by 0.9% y/y while wages expanded by 9.9% y/y leading to real wage bill expansion in April by 6.3% y/y.
- Both business and consumer sentiment in May recovered markedly, with manufacturing, trade and transportation returning to the pre-covid levels. Consumers are also much less afraid of unemployment.
The week ahead:
- Industry and retail trade should record superb growth rates in April in y/y term as they will mostly reflect previous year’s lockdown period. That said, we estimate the underlying growth trend of the economy is also robust, in line with our full-year GDP growth forecast (5.1% in 2021).
- Broad money (M3) supply growth rate started to cool down in April, on our estimates, amid a sluggish loan origination.