Drop in inflation as a consequence of lower fuel prices

Final data on inflation in line with the flash estimate by GUS

In accordance with the final GUS data, CPI inflation in June has decreased to 1.5% YoY vs. 1.9% in May, running in line with the flash estimate by GUS and below our forecast, which was equal to the market consensus (1.7%). According to our estimates, core inflation has not changed in June compared to May and amounted to 0.8% YoY.

Drop in inflation as a consequence of lower fuel prices

The drop in inflation (by 0.4 pp) was due to lower dynamics of prices in the category "transport” (0.0% YoY in June vs. 4.2% in May). The main factor behind lower growth rate of prices in this category was lower fuel prices (down by 4.1% MoM in June). According to GUS statement, its decrease was also due to lower prices of passenger cars (down by 1.9% MoM in June).

First price effects of frost have materialized

The annual price growth rate in the category "food and non-alcoholic beverages” has not changed in June compared to May and amounted to 3.7 YoY. Its stabilization was due to higher annual growth rate of prices i.a. in the category "bread”, "milk, cheese, eggs” and to its decrease i.a. in the categories "fruit”, "vegetables”, "meat”, and "sugar”. Especially noteworthy in the data is the decrease in the monthly dynamics of fruit prices (0.8% MoM in June vs. 5.8% in May), which points to the temporary weakening of the price effects related to frost. Nonetheless, in the forthcoming months we expect an increase in the monthly dynamics of prices in this category, due to the start of the season for other fruits affected by spring frost (currants, raspberries, cherries, and apples in autumn).

Road charge to boost inflation

Today's data pose a downside risk to our forecast, in which in two subsequent quarters average inflation in Poland will run at level of ca. 1.9%-2.0% YoY. However, conducive to increase in inflation is the introduction of a new road charge announced by the government. In the next MACROmap we will present its expected impact on inflation.

Today's final data on inflation are neutral for PLN and prices of Polish bonds.