Higher fuel prices pushed up inflation

Higher fuel prices pushed up inflation

According to Statistics Poland (GUS) data, CPI inflation rose to 3.0% YoY in July from 2.5% in June, in line with the flash estimate. The main factor pushing up inflation was a 13.9% MoM increase in the prices of “fuels and lubricants for personal transport equipment” following the end of the government’s intervention in the fuel market, which involved a lower VAT rate and a cap on retail prices. As a result, annual fuel price growth increased from 5.3% YoY in June to 15.8% in July, adding approximately 0.6 pp to inflation.

The second factor contributing to the rise in headline CPI inflation was core inflation excluding food and energy prices, which we estimate at approximately 3.2% YoY in July, up from 3.0% in June. The increase was driven by several categories, including “Other games, toys and collectors’ items”, “Mobile telephone services” and “Passenger transport by air”. The data thus indicate that the second-round effects of the supply shock related to the conflict in the Middle East remain limited.

Lower food prices curb the rise in inflation

A significant factor lowering inflation was weaker price growth in the “food and non-alcoholic beverages” category (-0.4% YoY in July compared with -0.2% in June). At the same time, food and non-alcoholic beverage prices fell in monthly terms for the third consecutive month (-0.8% MoM in July compared with -0.7% in June and -1.0% in May). Nevertheless, the monthly change in food and non-alcoholic beverage prices returned to its seasonal pattern in July. As in the previous month, the slowdown in food price growth was broad-based, with the main contribution coming from a sharp decline in prices in the “fruit and nuts” category (-3.4% YoY in July compared with -0.5% in June), driven primarily by lower prices of fresh stone fruit and pome fruit. Fruit prices fell despite adverse agrometeorological conditions in Poland, including drought and spring frosts, suggesting that weaker domestic harvests are being offset by cheaper imports. A relatively sharp slowdown in price growth was also recorded in the “sugar, confectionery and desserts” category (1.0% YoY in July compared with 1.9% in June), mainly reflecting weaker growth in chocolate and cocoa prices. Lower non-alcoholic beverage price growth also reduced inflation in the “food and non-alcoholic beverages” category (2.0% YoY in July compared with 2.2% in June), primarily due to weaker growth in the prices of coffee and coffee substitutes.

GDP growth in Q2 in line with our expectations

According to Statistics Poland’s flash estimate, GDP growth increased to 3.8% YoY in Q2 from 3.5% in Q1, in line with our forecast and above market expectations of 3.7%. Seasonally adjusted quarterly GDP growth increased to 0.9% in Q2 from 0.6% in Q1. The data released by Statistics Poland are preliminary, while the full GDP data, including information on its composition, will be published on 31 August.

We believe that the main drivers of the acceleration in economic growth in Q2 were a recovery in construction activity following the cold winter and favourable conditions in industry, particularly in export-oriented sectors. On the demand side of GDP, we expect investment growth to have accelerated and the contribution from net exports to have increased in Q2, which together more than offset the slowdown in private consumption.

Lower likelihood of an interest rate cut in September

We believe that inflation will come in above our previous expectations in the coming months (see MACROmap of 06/07/2026). Given the prospect of this scenario materialising, the likelihood of the one-off 25 bp interest rate cut we had forecast for September has declined significantly. We will present our detailed revised inflation forecast in the MACROmap on 24 August.

Today’s data on Q2 GDP growth and July inflation are neutral for the PLN exchange rate and yields on Polish bonds.