Inflation above the flash estimate
According to final data, Poland's CPI inflation shrank to 4.7% YoY in November vs. 5.0% in October, running above the flash estimate provided by GUS (4.6%). Inflation was primarily driven down by a slower price growth in the “fuels” category (-6.0% YoY in November vs. 0.0% in October), largely due to last year’s high base effects. Another factor driving the inflation down was a slightly slower growth in the prices of food and non-alcoholic beverages (4.8% vs. 4.9%). A slower growth in the prices of vegetables was the main reason behind the inflation fall in this category, also due to last year’s high base effects, just as it was the case with the prices of fuels. A stronger price growth in “meat” (mainly due to the growing prices of poultry) and “milk, cheese and eggs” (mainly due to the growing prices of eggs) categories had the opposite impact. Butter was still the food basket category where price growth was the strongest (20.5% YoY in November vs. 21.9% in October). However, given a strong slowdown of butter price growth in the global markets, we do not believe there will be much room for raising prices in Poland, either. A stronger price growth in the “energy” category (11.7% vs. 11.5%) and higher core inflation, which according to our expectations went up from 4.1% YoY in October to 4.4% in November had the opposite impact on inflation. Core inflation was driven up primarily by a stronger price growth in the “communication” category, with prices of telephone and telefax services going substantially up. Higher price growth rates in such categories as “recreation and culture”, “housing (excl. energy)”, “clothing and footwear” and “household equipment and routine household maintenance” also had a positive impact on core inflation.
Core inflation rise boosted by the growing prices of services
We estimate that core inflation rose by 0.3% MoM, running markedly above its seasonal pattern (ca. 0.0% for a November). In our opinion, it indicates that the inflationary pressures in the Polish economy are still relatively strong. The continuing, strong growth in the prices of services (7.2% in November vs. 6.7% in October; strongest since January 2024), which is much in contrast to the slowing growth in the prices of goods (3.8% YoY vs. 4.3%) is the reason why the core inflation remained elevated and sticky. In our view, wage pressure is still the main pro-inflationary factor as regards the prices of services. Nominal wage growth in the national economy is still strong given its historic levels despite a slowdown from 14.7% YoY in Q2 to 13.4% in Q3.
Elevated inflation as an argument in favour of keeping interest rates unchanged
Today’s data published by GUS is consistent with our scenario, in which inflation will remain above the upper limit for deviations from the inflation target (2.5% +/- 1 pp.) until June 2025 (see MACROmap of 09/12/2024). We believe that it will reach its local peak in March 2025 at 5.5%, and then it will gradually begin to fall. Our scenario assumes that inflation will stay close to the upper band for deviations from the inflation target (3.5%) despite a strong decline in H2 2025. The inflation path that we expect to see in the coming quarters is consistent with our NBP interest rate forecast, which assumes that the rates will be cut for the first time (by 25bp) in Q3 2025 (see MACROpulse of 04/12/2024).
Today’s data is neutral for the PLN and the yields on Polish bonds.
