Poland Weekly Focus | How did the Polish economy perform in June?
Real economy data for June will be in focus this week. Industrial production and retail sales should keep solid double-digit dynamics, while unemployment rate likely dropped further. MinFin to hold a regular bond auction. Global concerns over Delta variant continue to weigh on the PLN.
July 20 | Industrial production to remain solid. We expect industrial production to sustain solid double-digit growth dynamics in June as we see it at 16.4% y/y (vs. market consensus at 18.0% y/y). While the base effect should still provide a helping hand and affect growth dynamics, strong sentiment and soaring new industrial orders are also driving the headline figure up.
July 21 | Retail sales to post double-digit growth. While the base effect should have a limited impact on growth figures in the coming months, June figure should still sustain double-digit dynamics. We expect retail sales to land at 11.2% y/y, slightly below the market consensus at 13.1% y/y. Although consumer sentiment did not improve further in June, solid labor market situation supports household spending.
Bond market drivers | 10Y yield stable around 1.65%. Over the course of the week, the 10Y Polish yield remained broadly unchanged and moved in a narrow range of 1.65-1.7%, while the spread against the German Bund stood close to 200bp. At the QE auction last Friday, National Bank of Poland bought papers worth PLN 4.4.bn including PLN 3.7bn in Treasuries and PLN 0.7bn in state-guaranteed papers of the BGK. Since the start of the QE program in March 2020, NBP purchased bonds worth PLN 140bn (5.5% of GDP). With higher than expected bond purchases at the July auction, NBP reaffirmed its dovish commitment and pledge to stable rates in coming months. This week, MinFin holds a regular bond auction with supply of up to PLN 8bn.
FX market drivers | Zloty remains weak. Last week, zloty remained under pressure of both global and local factors. Growing global concerns over Delta variant and strengthening of the US dollar coupled with dovish rhetoric of the MPC and the recently inflamed conflict with the EU over the rule of law, are weighing on the PLN. Zloty lost 1.3% vs. EUR since the beginning of July and together with the Hungarian forint they were the worst performing EMEA currencies.