Inflation in line with GUS flash estimate
The final data has shown that CPI inflation in Poland rose to 4.9% YoY in September from 4.3% in August, in line with the flash estimate by GUS. The rise in inflation is mainly accounted for by a rise in core inflation, which according to our estimates rose to 4.3% YoY in September from 3.7%, to a large extent due to low base effects in the ‘pharmaceutical products’ category (in July 2023 prices in this category fell by 5.3% MoM, which drove core inflation down by ca. 0.4 pp). The rise in inflation is also accounted for by higher growth in the prices of food and non-alcoholic beverages (4.7% YoY in September vs. 4.1% in August), driven, among other things, by faster rises in the prices of fruit and vegetables (due to poor fruit and vegetable crops this year), soaring prices of butter (global prices hitting record high levels) and last year low base effects. Inflation was also driven up by faster growth in energy prices (11.4% YoY in September vs. 10.4% in August), partially offset by a further decline in the prices of fuels (-2.0% vs. -1,7%) driven down by falling oil prices.
Wage pressures drive up core inflation
We estimate that MoM growth in core prices in September (0.3%-0.4%) printed above the seasonal pattern (ca. 0.1%), which shows that inflationary pressures in the Polish economy continue at an elevated level. In the context of core inflation, it is also worth noting that the growth rate of services prices continue to increase: price rises picked up to 6.8% YoY in September from 6.2% in August. We maintain our assessment that wage pressures remain the main driver of inflation in services prices. Nominal wage growth in the national economy picked up to 14.7% in Q2 from 14.4% in Q1; we expect it to stand at 14.3% and 14.2% in Q3 and Q4, respectively.
Inflation to remain at an elevated level
The GUS data published today is in line with our scenario, which expects inflation to remain above the upper band for deviations from the inflation target (2.5% +/- 1 pp) until June 2025 (see MACROmap of 07/10/2024). We forecast that inflation will reach its local maximum of 5.4% in March 2025, and then will start to gradually fall. Our scenario expects that although inflation will fall markedly in H2 2025, it will oscillate around the upper band for deviations from the inflation target (3.5%). The inflation path that we expect to see in the coming quarters is consistent with our NBP interest rate forecast, which expects the first rate cut (by 25pb) in Q3 2025 (see MACROmap of 07/10/2024).
Today’s data is neutral for the PLN and the yields on Polish bonds.
