Too soon to declare a drop in inflationary pressures

Inflation remains unchanged in December

According to the final data, CPI inflation in Poland remained stable between December and November at 4.7% YoY, coming in below the GUS’ flash estimate (4.8%). Inflation was driven up by higher price growth in the “fuels” category (-3.9% YoY in December vs. -6.0% in November) due to rising crude oil prices on the global market. Inflation was further supported by rising prices in the “energy” category (12.0% vs. 11.7%), mainly attributable to higher liquid and solid fuel prices. On the other hand, lower core inflation, which, according to our estimate, shrank to 3.9% YoY in December vs. 4.3% in November, drove headline inflation down. The decline in core inflation was primarily due to lower price growth in the following categories: “recreation and culture” (due to slower growth in package holiday prices compared to the previous year), “alcoholic beverages and tobacco” (on account of lower prices of alcoholic beverages) and “furnishings, household equipment and routine household maintenance” (mainly due to falling prices in “furniture, furnishings and lighting equipment” and “household appliances”) and “transport, excluding fuels”, due to a drop in the prices of transport services. The rate of growth in the “food and non-alcoholic beverages” category did not change between November and December (4.8%). Consequently, the monthly price growth in this category printed markedly below its seasonal pattern (0.2% MoM vs. 0.6%), which came as a huge surprise given the growing prices of agricultural commodities. In our view, the continuing, strong pricing competition between retail store chains, which is additionally boosted by households’ recently-increased propensity to save, was a significant inhibitor of price growth in the “food and non-alcoholic beverages” category in December.

Too soon to declare a drop in inflationary pressures

We estimate that core prices decreased by 0.1% MoM, slightly below their seasonal pattern (approximately 0.1% in December). At the same time, if our estimate is confirmed, this would be the first drop in core prices on a monthly basis since September 2023. However, considering the high pace of core price growth in the previous months, we believe it is still too early to interpret the December data as a sign of weakening inflationary pressures. The high services price growth (6.6% YoY in December vs. 7.2% in November) continues to be a factor supporting high core inflation, as it substantially exceeds the growth of goods prices (4.0% vs. 3.8%). Wage pressures remain the primary driver of inflation in services prices. We estimate that nominal wage growth in the national economy stood at 12.8% YoY in Q4, having decreased from 13.4% in Q3, nevertheless it remains at historically high levels.

Slight downside risk for our inflation trajectory

Due to a lower starting point (we expected inflation to rise to 5.0% in December), we see a downside risk to our inflation trajectory. We will present our revised inflation forecast in the upcoming MACROmap.

Today’s data, which is lower than the flash GUS estimate, is slightly negative for the PLN and yields on Polish bonds.

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