TOP MACRO THEME(S):
- Corporate profits shrink: Intensified cost pressure and growing barriers on the demand side led to a deterioration of corporate profits in 3q22. Corporate profits share in national income most likely held up well another quarter in a row. Inventories, after a period of massive build-up, crossed a tipping point and started to exert pressure on corporate liquidity.
- Tough start into the fourth quarter: Monthly data for October (industry, construction, sales) indicate that the beginning of 4q22 was difficult and marked by growing pressure from falling real incomes of households. The data may reinforce the MPC's view of a disinflationary impact of the economic slowdown and its decision to suspend the interest rate hikes cycle at 6.75%.
WHAT ELSE CAUGHT OUR EYE:
- State budget sported a surplus of PLN 27.3bn after October and is on a good track to meet its expected outturn as per 2023 budget bill (approx. PLN 23bn). Should some expenditures be accelerated and moved from 2023 into 2022 (in the same magnitude as in previous years), the state budget deficit may reach PLN 50bn at end-2022. This move would, however, require a parliamentary consent to update the 2022 budget bill.
- Broad money (M3) supply growth slowed down to 7.0% y/y in October (vs 7.7% y/y in September), while real M1 plummeted further, by almost 25% y/y. Data is indicative of incoming slowdown, mostly on the consumer side – consumer loans declined in October, while (PLN denominated) mortgage loans grew by only 1.1% y/y.
THE WEEK AHEAD:
- Detailed GDP figures for 3q22 will be revealed on Wednesday. We estimate that both private consumption and investment demand moderated in 3q22 (PKOe: 1.6% y/y and 4.2% y/y, respectively). It is also likely that contribution of inventories to GDP growth retreated further from the all-time high in 1q22.
- CPI inflation in November said ‘enough’ and inched down on fuel prices - on our early estimate - but food prices could be a major factor of upside surprise.
- Manufacturing PMI in November most likely increased on improvement in automotive supply chains, but it is still well below the neutral level.
NUMBER OF THE WEEK:
- 7% - Poland’s yield curve dived below 7% in all tenors, first time since late September.