Poland | Weekly Focus
Last week brought a major negative surprise, as industrial production growth decreased by 1.3% y/y in August. We see considerable risks to our FY19 GDP growth forecast if the now-cast prediction of 3.8% growth in 3Q19 materializes. This week, the unemployment rate for August will be published, and it should arrive at a record-low 5.2%. Bond and FX markets are under the influence of PMI and Ifo indices for the Eurozone and major member countries.
September 24: Unemployment rate to stay record-low. We expect the unemployment rate to arrive at 5.2% in August, unchanged from the previous month. The situation on the labor market remains favorable, with wage growth fluctuating around 7%, employment growth slightly below 3% and record-low unemployment.
Bond market drivers: 10Y yield holds above 2%. Over the course of the week, core market developments and weaker local macro data weighed on the long end of the Polish curve. While the 10Y German Bund went down by almost 10bp, the 10Y Polish yield decreased by 12bp. This week opened with a strong negative surprise, as the preliminary PMI Index for manufacturing in Germany in September plummeted to 41.4, the lowest level since the 2012 recession. Thus, the Polish long end might follow the German market and dive as well.
FX market drivers: Zloty weakened sharply. The zloty paired all recent gains and depreciated by 1.2% vs. the EUR and closed the week above 4.37 vs. the EUR. We think that the recent weakening was mostly driven by the FED decision and US dollar strengthening.