According to Statistics Poland (GUS) data, CPI inflation fell to 3.5% YoY in October from 4.1% in September, in line with the flash estimate. The main factor driving
According to Statistics Poland (GUS) data, CPI inflation fell to 3.5% YoY in October from 4.1% in September, in line with the flash estimate. The main factor driving inflation down was a decline in the annual growth rate of prices for “fuels and lubricants for personal transport equipment” to 21.7% YoY from 36.1% in September, linked to renewed government intervention in the retail fuel market, which reduced the annual inflation rate by 0.8 pp. Lower core inflation (excluding food, fuel and energy prices) also contributed to lower headline inflation. According to our estimates, core inflation stood at 2.9% YoY in October, down from 3.1% in September. The decline in core inflation was driven primarily by slower price growth in the “recreation, sport and culture” category, and in particular by a significantly lower rate of increase in prices for “package holidays abroad” than in September. The decline in core inflation in October indicates that, so far, the energy shock associated with the conflict in the Middle East has contributed mainly to higher energy prices, while its impact on other prices in the economy remains limited. This assessment is supported by the increase in the annual growth rate of heating fuel (“solid fuels”) prices to 24.5% YoY in October from 16.7% in September. This increase was the main reason behind the rise in energy price inflation to 6.1% YoY from 5.0% in September, adding 0.1 pp to the annual inflation rate.
Decline in food prices drawing to a close
Higher price growth in the “food and non-alcoholic beverages” category contributed to higher inflation in October (-0.1% YoY in October versus -0.4% in September). On a monthly basis, prices increased by 0.4% in October following a 0.1% rise in September, coming in below their seasonal pattern (around 0.6%). Higher food and non-alcoholic beverage inflation was driven primarily by stronger price growth for fruit (0.7% YoY versus -2.6%) and vegetables (1.6% versus -0.3%), supported by weak domestic harvests this year. According to GUS estimates published at the end of September, this year’s domestic harvests of fruit and field-grown vegetables are approximately 15.9% and 4.0% lower YoY, respectively. Conversely, price growth in the “sugar, confectionery and desserts” category slowed (-0.3% versus 0.8%), mainly due to lower cocoa prices on global markets.
In our view, October was the last month in which food and non-alcoholic beverage prices recorded negative annual growth. In the coming months, price growth in this category will trend upwards, largely reflecting the lagged impact of the shock in fertiliser and energy markets on food prices. Another important factor behind stronger price growth will be the increase in dairy and pork prices that we expect, resulting from the cyclical nature of these markets. Moreover, from March 2027 onwards, low base effects will contribute to higher food price inflation.
GDP growth in Q3 slightly below expectations
According to Statistics Poland's flash estimate, GDP growth slowed to 3.5% YoY in Q3 from 4.1% in Q2, coming in below both our forecast (3.7%) and market expectations (3.6%). Seasonally adjusted quarterly GDP growth stood at 0.8% in Q3 versus 1.1% in Q2. Consequently, Q3 was the eighth consecutive quarter in which GDP increased on a QoQ basis. The figures published by GUS are a preliminary estimate, while the full GDP release, including expenditure breakdown details, will be published on 30 November.
In our view, slower GDP growth in Q3 was driven primarily by a smaller contribution from net exports. Meanwhile, faster consumption growth contributed to higher GDP growth relative to Q2, supported by strong consumer sentiment, continued growth in real household incomes and a decline in households' propensity to save. Faster investment growth also supported GDP, reinforced by the recovery in infrastructure investment co-financed by EU funds.
Second-round effects of the commodity price shock will intensify
The inflation and GDP data indicate that, despite a clear strengthening in demand across the economy, second-round inflation effects associated with the commodity price shock caused by the conflict in the Middle East remain limited. Nevertheless, we maintain our assessment that the impact of higher energy prices on food prices and core inflation will intensify in the coming months. Moreover, the “Lower Fuel Prices” programme launched in October, which includes reductions in VAT and excise duty on fuels as well as an administratively imposed cap on retail fuel prices, is scheduled to remain in force until the end of 2026. Consequently, short-term inflation forecasts should consider the potential inflationary impact associated with the expiry of the programme, which could heighten the Monetary Policy Council’s concerns about the emergence of second-round effects. We therefore maintain our scenario of one increase in the reference rate to 4.00% in January 2027. Support for this scenario is provided by the results of the National Bank of Poland’s November inflation projection (see MACROmap of 09/11/2026). We will present our revised inflation forecast in the upcoming MACROmap.
Today’s data on October inflation and Q3 GDP is neutral for the PLN exchange rate and yields on Polish bonds.
