TOP MACRO THEME(S):
- Frozen: the housing market: The housing market is currently going through a strong decline in transaction volume. On the supply side we can still see a large number of projects under construction and a rapidly growing number of completed and unsold units on the primary market. We expect housing prices to fall in the coming year, with deeper declines in smaller cities. The full report (in Polish) of PKO’s Real Estate Research Team is available here.
WHAT ELSE CAUGHT OUR EYE:
- Final CPI figures for September showed that as for now weaker demand is not enough to calm down price pressures. The surge in core CPI (PKOe: 10.7%) reflects some one-off shifts in education and cloths (cold September).
- Current account deficit for August deteriorated on energy bill (to 3.9% of GDP, 12month cumulative). That said, exports got a boost from reviving automotive.
THE WEEK AHEAD:
- ‘Inflation bites consumers’ is the main story for Poland’s next week data releases.Indeed, accelerating core inflation in September (PKOe: 10.7%) indicates that a broad range of price lists is still to be updated. This is a major blow to consumer confidence, which is close to record lows. Wages (PKOe: +13.6% y/y) can’t keep up pace with inflation anymore. Hopefully, labour shortages mean that declining demand on workers will manifest in fall of vacancies first while employment (PKOe: +2.4% y/y) reduction is a second choice. Last but not least, increased population (refugees settling down) kept real retail sales afloat (PKOe: 5.2% y/y). There is a light in a dark inflation tunnel: a PPI inflation ‘plateau’ (PKOe: 25.5% y/y) would signal some easing of CPI inflation is still at play.
- Despite recession in German manufacturing, industry in Poland held up well in September (8.5% y/y). Weakness of housing permits and mortgage loans suggests some construction works cooling ahead, but September figure should still look fine (PKOe: 6.1% y/y).
- Eurostat will publish fiscal data (ESA) for 2q22. We estimate fiscal deficit (1.6% of GDP after 1q22) barely changed as war-related costs (incl. aid for refugees, see chart of the week) were offset with revenues boosted by elevated nominal GDP growth rate.
NUMBER OF THE WEEK:
- 693 PLN/MWh (~EUR 145) - a price cap on electricity for households in 2023; if approved it will shift our CPI inflation forecast down by approx. 1.5pp.