Inflation in line with GUS flash estimate
According to GUS data, CPI inflation in Poland dropped to 14.7% YoY in April from 16.1% in March, which is in line with GUS flash estimate and below market consensus equal to our forecast (15.0%). This means that inflation was running above the upper band for deviations from the NBP’s inflation target (3.5% YoY) for 25 months.
Slower growth in food prices drives the inflation down
A strong slowdown of price growth in the “food and non-alcoholic beverages” category (19.7% YoY in April vs. 24.0% in March) was the main reason behind the inflation drop. Price growth in this category was driven down by a slower growth in the prices of meat, bread, milk products and sugar (mainly due to the last year’s high base effects) as well as vegetables (due to the fading of the impact of the cold weather that had affected the supply of vegetables in Southern Europe, see MACROpulse of 15/03/2023). Inflation was also driven down by a slower growth in the prices of energy (23.5% YoY in April vs. 26.0% in March), which resulted primarily from a slower growth in the prices of liquid and solid fuels. Furthermore, inflation was also driven down by the prices of fuels (-0.1% YoY in April vs. 0.2% in March), which were falling due to the decline in the global prices of oil and the appreciation of the PLN against the USD seen over the last couple of months.
Inflation pressure still strong
Inflation in April was also driven down by lower core inflation, which we estimate to have fallen from 12.3% YoY in March to 12.2% in April. The core inflation was driven down by a slower price growth in such categories as “recreation and culture” (mainly due to a slower growth in the prices of package holidays abroad), “furnishings, household equipment and routine household maintenance” (due to a slower growth in the prices of furniture, furnishings, lighting equipment, household appliances, and cleaning and maintenance products), “restaurants and hotels” and “miscellaneous goods and services” (due to a slower growth in the prices of personal hygiene and beauty products). Even though core inflation fell slightly in April, its level is still historically very high, which is indicative of the continuing, strong inflation pressure in the Polish economy.
Inflation will continue to fall in the coming months
Today’s data combined with the recent appreciation of the PLN (see MACROmap of 15/05/2023) is consistent with our forecast in which inflation is to fall gradually in the months to come, and to reach 7.1% YoY in December and 11.8% in 2023 (vs. 14.3% in 2022).
In our opinion, today’s final data on inflation is neutral for the PLN and yields on Polish bonds.