Slowest growth in the prices of services since November 2019
Inflation comes in line with the flash estimate provided by Statistics Poland
In accordance with the final data, CPI inflation in Poland did not change between August and September, and stood at 2.9% YoY, in line with the flash estimate published by Statistics Poland (GUS). The strongest downward impact on inflation was exerted by the prices of food and non-alcoholic beverages, whose growth slowed from 4.9% YoY in August to 4.2% in September, mainly as a result of a slower growth in the prices of “oils and fats”, “vegetables” and “fruits”. In our opinion, the annual growth in the prices of fruits and vegetables slowed due to a huge supply of both, which resulted from very good agro-meteorological conditions seen this year (according to GUS, this year’s production of vegetables and fruits from trees will surpass the last year’s harvest by approx. 6% and 10%, respectively). Inflation was also driven down by lower core inflation (excluding food and energy prices), which went down from 3.2% in August to 3.1% in September in accordance with our estimates. The drop was broad-based, and resulted from slower price growth in such categories as “communication”, “recreation and culture”, “education” or “restaurants and hotels”. Stronger price growth in the “fuels” category, from -7.7% YoY in August to -4.9% in September, had the opposite impact on inflation.
Slowest growth in the prices of services since November 2019
What is particularly notable about the September inflation data breakdown is that the growth in the prices of services slowed from 6.0% YoY in August to 5.8% YoY in September (slowest since November 2019). Consequently, even though it is still much stronger in comparison with the prices of goods (1.9% YoY in September), its decline suggests, along with the decline in core inflation, that the inflationary pressure is gradually easing. In the coming months, the annual inflation will be driven down by the substantial decline in oil prices (below our forecast) that is currently taking place. In our view, the anti-inflationary impact of lower oil prices on inflation will be offset by the pro-inflationary effect of continuing growth in the prices of systemic heat that we expect to see. Given the factors above, we can see a downside risk to our forecast for NBP interest rates, which assumes no change in the rates before the end of 2025. In our view, the structure of inflation in September and the falling prices of oil are indicative of a growing likelihood of interest rate cuts in the November meeting of the MPC.
In our opinion, today’s data on inflation will be neutral for the PLN and the yields on Polish bonds.