Inflation in line with GUS flash estimate
The final data has shown that CPI inflation in Poland went up to 4.3% YoY in August vs. 4.2% in July, aligning with the GUS’ flash estimate. The main driver of inflation growth was higher prices of food and non-alcoholic beverages (4.1% YoY in August vs. 3.2% in July). The biggest contributor to this increase was the higher growth of vegetable prices (5.2 YoY in August vs. 2.1% in July), attributable to this year's poor harvest. At the same time, an acceleration in the price growth of many products (e.g. in the “oils and fats” category) was supported by last year’s low base effects. Another contributing factor was a stronger growth in energy prices (10.4% YoY in August vs. 10.1% in July), while the opposite impact came from a slower growth of fuel prices (-1.7% YoY in August vs. 1.2% in July) supported by a drop in global oil prices observed in recent months. At the same time, we estimate that core inflation remained stable between August and July at 3.8% YoY.
Inflationary pressures remain elevated
The monthly growth of core prices in August, which we assessed to be 0.3%, printed above the seasonal pattern (ca. 0.0%), indicating sustained elevated inflationary pressures in the Polish economy. In the context of core inflation, it is worth noting the persistently high growth in prices of services, which grew by 6.2% YoY in August, the same as in July. We believe that wage pressures remain the main inflationary factor in prices of services. The nominal wage growth rate in the national economy climbed to 14.7% in Q2, compared to 14.4% in Q1. We believe that in Q3 and Q4 it will stand at 14.3% and 14.2%, respectively.
Inflation will keep on rising
The GUS data published today aligns with our forecast that inflation will remain markedly above the upper band for deviations from the inflation target (2.5% +/- 1 pp.) until September 2025 (MACROmap of 02/09/2024). We believe that it will reach its local peak in March 2025 at 5.7% and will begin to gradually decrease thereafter. The sharp drop in oil prices seen in recent weeks represents a downside risk to this scenario. The inflation path that we expect to see in the coming quarters is consistent with our NBP interest rate forecast, which assumes that the first rate cut will occur in Q3 2025.
Today’s data is neutral for the PLN and the yields on Polish bonds.
