Final data on inflation in line with GUS flash estimate
In accordance with the GUS final data, CPI inflation rose to 2.6% YoY in November vs. 2.5% in October, running in line with the GUS flash estimate equal to the market consensus and our forecast.
Pork price dynamics the highest since 2005
The increase in inflation in November resulted to the highest extent (by 0.1 pp) from higher dynamics of prices in the category “communications” (from 1.0% YoY to 3.7%, due to last year’s low base effects). Similar contribution to the increase in the annual price dynamics had also higher dynamics of prices in the category “food and non-alcoholic beverages” (6.5% YoY vs. 6.1% in October). Especially noteworthy in the structure of food price growth is the decreasing dynamics of the prices of vegetables (16.0% YoY in November vs. 16.3% in October). Like a month ago, in November, despite the crop failure caused by drought, conducive to a slower increase in prices in this category were last year’s high base effects. Also worth noting is the constantly increasing annual dynamics of the prices of fruit (15.0% YoY vs. 12.5% in October) due to lower harvest resulting from spring frost and drought. However, the annual increase in fruit prices was lower than expected, which might point to weaker-than-forecast price effects of this year’s unfavourable weather conditions. Noteworthy is also the increase recorded in November in the dynamics of pork prices (16.1% YoY vs. 14.1% in October, the fastest growth since 2005), being the effect of a deepening meat shortage in China resulting from the losses in the pig herd due to ASF. As we expected, it has contributed to price dynamics in the “meat” category increasing to 9.2% YoY vs.8.0% in October.
The trend towards higher core inflation continues
As we expected, core inflation (excluding prices of food, fuels and other energy rose to 2.6% YoY in November from 2.4% in October, hitting the highest level since April 2012. The main factor behind higher core inflation was the aforementioned increase in price dynamics in the category “communications” and higher growth rate of prices in the category “recreation and culture” (from 2.6% to 3.6%), also largely caused by the last year low base effects. We expect that, boosted by wage pressure and higher inflation expectations, core inflation will reach the local maximum in Q1 2020 (2.8% YoY).
The inflation peak is approaching in Q1 2020
We maintain our forecast that inflation will be showing an upward trend in subsequent months and will amount to 3.5% YoY in Q1 2020, reaching its local maximum. The factors conducive to increase in inflation will be the forecast by us higher dynamics of energy and fuel prices and higher core inflation. Slower growth of food prices will have an opposite impact. Our forecast assuming a significant decrease of inflation starting from Q2 2020 is consistent with our scenario, in which interest rates in Poland will remain stable at least until the end of 2020 (see MACROmap of 9/12/2020).