PLN: Mixed Economic Signals as Second Data Set Looms

Yesterday's economic data release in Poland offered a nuanced perspective on the country's economic landscape. The industrial production figures revealed a larger-than-expected drop, signaling potential weakness in the sector during Q3. This outlook, however, is anticipated to shift towards recovery in Q4. Conversely, the Producer Price Index (PPI) exhibited a more significant decline than projected, while wage growth fell short of expectations. The influence of base effects played a substantial role in these outcomes. On the labor front, mounting pressure for easing is evident.

The upcoming release of a second set of data today, encompassing retail sales and construction numbers, is anticipated to shed further light on Poland's economic trajectory. According to our projections, July likely witnessed yet another decrease in goods retail sales. However, the situation seems to be stabilizing, partially attributed to lower inflation enabling a resurgence of real growth in wages.

In response to the previous day's negative surprise, the Polish zloty experienced a depreciation of nearly 0.5%. Despite this setback, the prevailing higher rates continue to underscore a stronger outlook for the PLN. As we await today's macroeconomic data, the potential for further negative surprises remains a point of interest. On the other hand, the overarching expectation persists for a relatively robust zloty, largely due to the influence of higher rates, at least until it reaches the threshold of 4.46 EUR/PLN.

 

 

PLN: Second set of economic data

Yesterday's data in Poland showed a mixed picture. Industrial production surprised with a much larger than expected drop and we expect it to remain weak in Q3 and we may see some recovery only in Q4. On the other hand, PPI fell more than expected and wage growth was also weaker than expected. In both cases the base effect plays a big role but, in the case of the labour market, there seems to be growing pressure for some easing. We'll see a second set of data today, with retail sales and construction numbers. According to our forecasts, July was yet another month of decline in goods retail sales, but the situation seems to be stabilising as lower inflation has allowed for a return of real growth in wages.

The Polish zloty weakened by almost 0.5% after the negative surprise yesterday, but higher rates continue to point to a stronger PLN. We will see today if macro data has further potential to surprise on the negative side. Otherwise, we continue to expect a rather stronger zloty due to higher rates - at least below 4.46 EUR/PLN.