TOP MACRO THEME(S):
- Monetary policy dilemmas (again): According to our estimates, the new NBP projection will show slightly lower GDP and CPI growth paths, but CPI would be heavily assumption-dependent. We expect the MPC to refrain from hiking rates the next week, but given the latest news on CPI and PMI and a rising stagflationary dilemma, we admit, it’s a very close call.
WHAT ELSE CAUGHT OUR EYE:
- CPI inflation in October rose to 17.9% y/y from 17.2% y/y in September. This time the reading was in line with expectations (PKO: 17.8%, cons: 17.9%). Inflation was pushed up by food prices and core inflation, while energy inflation moderated a bit. CPI might stabilize in the next two months, but it will likely increase again at the beginning of 2023 on statistical effects (VAT cuts in Jan. and Feb. 2022) and new energy tariffs. However, in the second half of 2023, we expect inflation to decline as adverse shocks fade away, and stagnating demand makes it difficult to raise prices.
- Manufacturing PMI fell to 42.0 pts in October from 43.0 pts. in September, reflecting a decline in new orders. The output sub-index remained below the neutral threshold for the sixth consecutive month and the pace of decline deepened. The survey suggests that the significant decoupling between the PMI and the current production readings may be partly due to the launch of new greenfield investments in Poland.
- According to media reports, the government may decide not to (fully) extend the Anti-Inflation Shield into 2023, in such a way so that fiscal revenues could be higher, but prices not.
- Moody’s has not revised Poland’s rating (A2 with stable outlook), but it has downgraded outlook for the local banking sector to negative.
THE WEEKS AHEAD:
- We will get a dose of local macro data. GDP growth in 3q22 slowed down further (PKO: 3.3% y/y). Final CPI figures for October will most likely confirm the flash reading – 17.9% for the headline, and 11.1% for the key core measure. CAB after Sep could have reached -4.0% of GDP (12M rolling sum).
NUMBER OF THE WEEK:
- 5.8% – annual GDP growth rate in 2q22 (vs 8.6% in 1q22, both figures revised).