CEE: Auto sector maintains positive momentum

Erste Bank Research Team Erste Bank

On the radar

Real Retail Sales in Poland landed at 6.8% y/y in June.
Real wage growth in Slovenia landed at 3.2% y/y in June.
Today, unemployment rate will be published in Poland.

Economic developments

Car registrations increased by 5.7% in the EU in the first half of the year, while most CEE markets recorded stronger growth. Slovenia led by a wide margin, at almost 22%, followed by Hungary at around 13% and Poland at 9%. Growth in Czechia and Croatia, at approximately 6% and 5%, respectively, was broadly in line with the EU average. However, the regional picture remained uneven: registrations were unchanged in Romania and declined by almost 4% in Slovakia over the first six months of the year. Overall, such development point to stronger underlying momentum in most of CEE countries compared to the EU. Such development point to stronger underlying momentum in most of CEE countries compared to the EU. We look at the car registrations as leading indicator for the overall economic development. From that perspective it is worth noting Romania, that in previous months experienced year-to-date contraction of new car registrations but stagnated in the whole first half of the year. It is in line with our expectations of Romania emerging from recession in the second half of 2026 (the FY growth forecast remain at -0.3%, however). Romania’s central bank also sees such scenario as likely, expecting a mild economic recovery in current quarter driven by reviving investment and private consumption, and expects a substantial disinflation in the third quarter.

Market movements

The ECB Governing Council's July monetary policy decision is due today and it will be followed by Lagarde's press conference. Following the rate hike in June, the deposit rate stands at 2.25%. Although renewed tensions in the Middle East are driving up energy prices, inflationary pressures have so far been lower than the ECB expected. Furthermore, core inflation and price trends in the services sector do not indicate a broadening of inflationary pressures. Poland central bank Tyrowicz said there is no risk of a 2022-style inflation surge, but real rates in Poland remain stimulative, suggesting policy is still too loose relative to inflation expectations. Czechia’s President Pavel vetoed the budget-rules amendment, warning it would ease government debt issuance and weaken parliamentary oversight of public finances.

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Erste Bank Research Team

Erste Bank

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