Polish CPI grew 16.1% y/y in August in a surprise acceleration after the pace of price growth appeared to have begun subsiding the preceding month, the statistical office GUS revealed in a flash estimate on August 31 (chart).
The reading is clearly above market expectations, which assumed that August would see the continuation of stable CPI growth at 15.5% y/y after 15.6% y/y in July. But while how the inflation index will perform in the coming months is highly uncertain, analysts say that the trend will eventually become downward, given the very clear economic slowdown.
That said, CPI growth will average 13% in 2022 overall, with risks to the forecast skewed upwards, Bank Millennium said in a note on the GUS release.
Further, “in 2023, there is a possibility that the CPI will still be in two-digit figures and it will largely depend on administrative and political decisions related to the extension of anti-inflation shields in 2023 and increases in electricity and gas prices for households,” Bank Millennium said.
Analysts also point to the government’s pressing on with a loose fiscal policy that will only be more difficult to rein in in the run-up to the elections in autumn 2023.
The August flash reading makes yet another hike of the central bank’s reference interest rate more likely next week. But the hike itself is expected to fall in the 25bp-50bp range only – taking the headline interest rate to 6.75%-7% - as the National Bank of Poland (NBP) will certainly take note of the economic slowdown.
The increase in the inflation rate came on the back of growth in all major components, GUS showed in the breakdown of the data.
Food prices grew 17.4% y/y in August, the flash estimate said – a pick up against a gain of 15.3% y/y in July.
Elsewhere, energy prices went up 40.3% y/y in August after growing 36.6% y/y the preceding month. Fuel prices further eased growth to 23.3% y/y in the eighth month after an increase of 36.8% y/y in June.
As headline inflation rose, its core component – prices without energy and food – also accelerated growth to an estimated 10% y/y, analysts say.
In monthly terms, the CPI increased 0.8% in August, the expansion picking up 0.3pp versus the preceding month.
Prices of food and non-alcoholic drinks accelerated growth by 1pp to 1.6% m/m in August. In the energy segment, prices grew the fastest since March, adding 3.7% after a gain of 1.3% m/m the preceding month. Fuel prices deepened their fall, sliding 8.3% m/m after decreasing 2.6% m/m in July.