Performance of economy for whole last quarter to be revealed this week. First comes data on labor market (employment and wage growth), then industry and retail sales should post solid growth. Bond and FX markets to remain under global influence (PMI, ECB meeting).
Watch this week
January 20 | Solid wage growth
Labor market conditions have been tight for a while already. We expect to see some acceleration of wage growth in December to 6.1% y/y (consensus at 6.2% y/y) after somewhat disappointing wage growth the previous month. Employment is expected to sustain 2.6% y/y growth. The underlying trends suggest, however, slowing growth dynamics of private consumption.
January 21 | Industry to accelerate
Industrial output growth is set to accelerate towards 6% y/y in December from meager 1.4% growth the previous month (calendar effects as well as improving PMI). Such development would put the average growth of industry in the last quarter marginally above average growth in the third quarter.
January 21 | Retail sales to go up
Nominal retail sales are expected to rebound to 7.8% y/y (vs. consensus at 7.6% y/y) in December, which would mean stabilization of quarterly growth slightly above 6% dynamics.
All in all, if there are no major surprises and both industry and retail sales growth arrives in line with expectations, we see 4Q19 growth at 3.8% y/y and FY19 at 4.2% (due next week). In 2020, we see the economy slowing toward 3.4%.
Last week's highlights
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Final CPI confirmed at 3.4% y/y in December.
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Core inflation arrived at 3.1% - highest rate since 2011.
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Trade surplus reached EUR 829mn in November alongside current account surplus of EUR 1457mn.
Market developments
Bond market drivers | Long end remains under pressure
The long end of the Polish yield curve is more or less exactly where it was one week ago, at 2.33%. Throughout the week, 10Y yields dropped by 10bp, but rebounded on Friday. After visible widening at the beginning of the year, the spread vs. Bunds was holding around 250 throughout the week, reflecting local inflationary pressure and rising market expectations for some monetary tightening this year.
This week, there are important data releases on both local and global markets. Locally, we get to see the performance of the economy in the last quarter, one week ahead of the annual GDP publication. The global mood is likely to be shaped by PMI releases in the Eurozone and the ECB meeting (due Thursday).
FX market drivers | EURPLN goes higher
The EURPLN touched 4.21 last week, but went only higher since then. At the beginning of this week, the EURPLN sits at 4.24, reflecting EURUSD development. This week, industrial output and retail sales are due and we will see some impact of local data only in the event of a major surprise. The release of PMIs in the Eurozone as well as the ECB meeting should be of the main interest for the markets, however. We see the EURPLN going further up.
This document is intended as an additional information source, aimed towards our customers. It is based on the best resources available to the authors at press time. The information and data sources utilised are deemed reliable, however, Erste Bank Sparkassen (CR) and affiliates do not take any responsibility for accuracy nor completeness of the information contained herein. This document is neither an offer nor an invitation to buy or sell any securities.
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