TOP MACRO THEME(S):
- Disinflation ahead: CPI inflation in November surprisingly dropped to 17.4% y/y from 17.9% y/y in October. Core inflation momentum is weakening. The structure of GDP growth is becoming less and less inflationary, and declining consumption will help to push inflation down.
WHAT ELSE CAUGHT OUR EYE:
- Manufacturing PMI in November rose to 43.4 from 42.0 in October. Despite the increase of the headline figure to the highest level in 5 months, the condition of the sector (as shown by the PMI components) keeps deteriorating. Production and new orders sub-indices have increased slightly, but remain well below the neutral level of 50pts. High inflation, war and general uncertainty are hindering demand. Companies are completing previously accumulated orders, but this ‘backlog cushion’ is rapidly shrinking.
- Investments of large corporates (employment >49 persons) in 3q22 increased by 15% y/y, both in the case of domestic and foreign-owned companies. In the face of the upcoming global economic downturn, activity of foreign investors may be particularly important for Poland’s export performance. Thanks to new plants/lines openings, Poland’s exports might keep growing even despite weaker external demand, being insensitive to its changes in the initial start-up phase of new investments.
- According to a recent report by Reuters and Maersk, Poland is among the most attractive locations for near-sourcing and shoring. For European companies Poland is ranked 1st. For all companies worldwide Poland is 4th most attractive globally an 2nd most attractive in Europe, just behind Germany.
- Zero VAT on food will be maintained at least for the first half of 2023, costing the state budget PLN 8bn.
THE WEEK AHEAD:
- We expect the MPC to keep rates unchanged at 6.75% on Wednesday. The disinflationary data released since the previous meeting gives the MPC a lot of arguments not to resume the cycle of rate hikes, and maybe start cutting rates in the second half of 2023.
NUMBER OF THE WEEK:
- -31% y/y – decline in apartment sales in November in 7 largest cities in Poland (source: RynekPierwotny.pl, which aggregates data for the primary market).