Drop in inflation due to lower dynamics of fuel prices

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

In accordance with the final GUS data, CPI inflation in May has decreased to 1.9% YoY vs. 2.0% in April, running in line with the flash estimate by GUS, which was equal to the market consensus and below our forecast (2.0%).

Drop in inflation due to lower dynamics of fuel prices

Conducive to decrease in inflation (by 0.3 pp) was lower growth rate of fuel prices, which dropped to 7.6% YoY in May vs. 14.4% in April. Its decrease was due to the high base effect from the previous year and the MoM fall in fuel prices in May 2017 (-2.0% MoM). Inflation was also negatively impacted by lower core inflation, which according to our estimates amounted to 0.8% YoY in May vs. 0.9% in April. Its decrease was an effect of lower dynamics of prices in the category "health" (0.2% YoY in May vs. 1.2% in April) and higher dynamics of prices in the category "communication" (1.7% YoY vs. -0.7%). On the other hand, conducive to increase in inflation (by 0.2 pp) were higher dynamics of food prices. They were to a large extent caused by higher growth rate of fruit prices, due to spring frosts.

Stabilization of inflation in subsequent months

Today's data support our forecast, in which in two subsequent quarters average inflation in Poland will run at level of ca. 1.9%-2.0% YoY. Our detailed inflation scenario in Poland for years 2017-2018 has been presented in today's MACROmap.

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