Final inflation data above the GUS flash estimate

According to final GUS data, Poland's CPI inflation rose to 5.9% YoY in September vs. 5.5% in August, running above the flash estimate by GUS (5.8%) and clearly above the market consensus (5.5%) and our forecast (5.6%). Thus, inflation reached its highest since June 2001, and was above the upper band for deviations from the NBP’s inflation target (3.5% YoY) for six consecutive months.

Inflation is rising in all major categories

Inflation was driven up by a stronger price growth in the “food and non-alcoholic beverages” category (4.4% YoY in September vs. 3.9% in August), which resulted primarily from a stronger growth in the prices of fruit and vegetables in the wake of generally unfavourable agro-meteorological conditions this year. It was also driven up by a stronger growth in energy prices (7.3% YoY in September vs. 6.6% in August), which resulted from the higher prices of gas, heat energy and liquid and solid fuels. Furthermore, inflation was also driven up by a stronger growth in the prices of fuels (28.6% YoY in September vs. 28.0% in August) due to globally growing oil prices. Higher core inflation, which we estimate to have risen from 3.9% in August to 4.3% YoY in September was also driving inflation up. Core inflation rose due to an increase in prices in many categories, e.g. “communication” (due to the growing prices of telephone and telefax services), “miscellaneous goods and services” (mainly due to an increase in the prices of personal hygiene and beauty products), “furnishings, household equipment and routine household maintenance” (due to higher prices of furniture, furnishings and household appliances), “transport, excluding fuels” (the effect of higher prices of motor cars and transport services), ”restaurants and hotels”, “clothing and footwear” (due to a stronger growth in the prices of clothing), “alcoholic beverages and tobacco” (an effect of the rising prices of alcoholic beverages) and “health” (among others, due to an increase in the prices of pharmaceutical products).

Core inflation continues to rise due to supply barriers

It is worth noting that core inflation is growing despite strong high base effects associated with the wave of COVID increases in the first phase of the pandemic. Like in the preceding months, the structure of the core inflation data indicates that this is partly due to the realisation of pent-up demand in sectors of the economy that were frozen in the previous months, which is pro-inflationary in a supply-constrained environment (see MACROpulse of 15/09/2021). This opinion is supported by continuous inflation rise in the “restaurants and hotels” category. However, it is worth noting that now there is one more factor that causes the prices to grow, namely the supply barrier effect, which drives the prices up in such categories as “household appliances”, “furniture and furnishings”, “audio-visual, photographic and information processing equipment” or “motor cars” due to lower supplies of certain goods.

Inflation will get close to 7%

We forecast that we will see inflation rising on in the months to come, and that it will get close to 7% at the turn of 2021 and 2022, and the annual average inflation will reach 4.8% YoY in 2021 and 4.9% in 2022. Prices in the coming months will be driven up by a stronger growth in the “food and non-alcoholic beverages”, “energy” and “fuels” categories as well as by higher core inflation (see MACROmap of 04/10/2021). However, we believe there is an upside risk for our inflation forecast for 2022 due to the government’s recent plans to increase the excise duty for alcohol and cigarettes in 2022, which have not been included in it.

In our opinion, today’s data on inflation are slightly positive for the PLN and the yields on Polish bonds.

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