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2017/10/16 / Erste Group Research

Weekly Focus Poland

Final CPI arrived at 2.2% y/y in September. Trade balance was positive, while current accounted posted EUR 100mn in August. Labor market data (employment and wage growth) due Tuesday; industrial output and retail sales growth to be published on Wednesday. Strong domestic data should be supportive for zloty, while bond market is likely to follow core markets.

October 17: Market expects employment to grow 4.6% y/y in September, while nominal wage should go up by 5.3% y/y Labor market conditions keep improving as employment continues to grow at a robust pace and nominal wage growth has been accelerating lately. We expect nominal wages to go up 5.3% y/y in September.

October 18: Industrial output and retail sales growth should remain strong We expect industrial output to grow 4.6% y/y in September vs. the market consensus of 5.1% y/y. Growth dynamics are expected to be lower compared to August (8.8% y/y) due to calendar effects (fewer working days). Overall, however, robust industrial performance and strong market sentiment suggest robust economic growth in 3Q17 that may be as high as 4.5% y/y. Strong retail sales growth should only confirm private consumption as the main growth driver this year. We expect retail sales to be up by 8.3% y/y (vs. market expectations of 7.9% y/y), as the high level of household spending is being continuously supported by tight labor market conditions.

Spread vs. Bunds narrows Over the last week, the spread vs. Bunds narrowed toward 290bp. The long end of the curve moved down by roughly 20bp over the last week. The long-term yield in Germany also went down, but to a much lesser extent. Domestic data releases are unlikely to move the curve this week more visibly and global sentiment is likely to shape the long end of the curve.

Zloty strengthened substantially. Over the last week, the EURPLN dropped from 4.30 (last Monday’s close) to 4.24 at the beginning of this week. The strengthening of the Polish zloty seems to have been driven mostly by global factors. However, the hawkish tone of some MPC members could also have helped the zloty. The domestic calendar is quite heavy this week. Strong monthly indicators confirming robust growth in 3Q17 (well above 4%) may support the zloty further. The S&P rating decision (due Friday after market close) should be neutral for the markets, as we do not expect an upgrade at this point.

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General information

AuthorErste Group Research
Product nameCEE Country Update
Topic in focusFX, Macro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-


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