Polish PPI inflation eases dramatically to 10.1% y/y in March

Polish PPI inflation eases dramatically to 10.1% y/y in March
/ bne IntelliNews
By Wojciech Kosc in Warsaw April 24, 2023

Poland's producer price index (PPI) expanded 10.1% year on year in March (chart) following a revised expansion of 18.2% y/y the preceding month, the country’s statistics office GUS said on April 24.

The PPI has been on a declining trend since September as inflationary pressures are easing in Poland in the wake of the economic slowdown. Other data – especially industrial production and retail sales – that were published on April 24 pointed to a technical recession in early 2023 and full-year GDP growth near 0%.

“The main reason for the strong drop in PPI inflation in annual terms is the very high reference base,” ING noted.

“The following months will bring a continuation of PPI deflation, with producer prices increasing at a single-digit rate as soon as April,” ING also said. 

The dramatic decrease in the PPI growth rate is unlikely to translate into a similarly-paced easing of headline inflation, however. 

Poland's March CPI growth came in at 16.1% y/y after an increase of 18.4% y/y the preceding month. CPI is expected to descend incrementally to around 10% y/y in December.

But even at 10%, CPI growth will be fast enough in 2023 to leave very little room for interest rate cuts despite the already weak demand in the domestic economy. The central bank’s reference interest rate has remained at 6.75% since September.

Prices in the most weighted manufacturing segment grew 4.8% y/y in March, after expanding a revised 11.3% y/y the preceding month, the breakdown of the data showed.

Mining and quarrying prices eased growth to 21.6% y/y in March after a gain of 29% y/y in February.

Electricity, gas and utility prices jumped 48.3% on the year in March – still easing versus a revised expansion of 72% y/y the preceding month.

The water supply segment saw prices expand 4.5% y/y in the third month, slowing down versus a revised increase of 6.3% y/y in February.

In monthly terms, the PPI dropped 0.8% in March after a revised fall of 0.5% month on month in February, GUS data also showed.

The index inched up 0.1% m/m in mining and quarrying while falling 0.3% m/m in manufacturing. In the utility segment, prices declined 3.4% m/m while adding 0.4% m/m in water supply.