CEE: Have you already done Christmas shopping?

On the radar

• Czech National Bank left the key interest rate unchanged at 4.0%

• In Hungary average wage growth reached 12.9% y/y in October

• In Slovakia producer prices declined by 8.9% y/y.

• In Poland, industrial output declined by -1.5% y/y in November. Employment contracted -0.5% y/y while wages grew 10.5% y/y. Producer prices dropped by -3.7% y/y.

• Today in Poland at 10 AM CET retail sales growth will be released for November.

• At 10.30 AM CET, Slovenia will release November’s producer prices and October’s wage growth.

• In Croatia, at 11 AM CET, November’s unemployment rate and October’s wage growth is due.

Economic developments

As Christmas is approaching, we look at the price index (2019=100) of selected food and gifts’ items. In the region, fish is one of the most traditional dishes served during the Christmas Eve. The average price in CEE for fish products is 40% higher compared to 2019 (that is pre-pandemic times) that we see as quite substantial increase. Baking will also require higher costs with eggs prices rising the most, close to 60% compared to 2019. Further, flour and butter are roughly 40% more expensive. As far as gifts are concerned, books are more expensive by “only” 20%, while price index of jewelry or chocolate is roughly 40% higher compared to 2019. That makes us conclude one should buy books as gifts for loved ones. But note that past performance is not necessarily indicative of future results.

Market developments

Czech central bank left interest rates unchanged at 4% on Thursday. This marks the pause, and it is the first such decision since the end of last year. The Czech central bank delivered rate cuts at the previous eight meetings it holds throughout the whole 2024. The decision aligns with both our expectations and those of the market. Looking ahead, we expect only very gradual rate reductions towards the 3% level over the next two years. The EURCZK is at 25.12. The Hungarian forint weakened against the euro the most since the beginning of the week with EURHUF as high as 414 on Friday morning. The Polish zloty on the other hand strengthened with EURPLN at 4.25. On the bond market, Romanian and Hungarian long-term yields moved visibly higher. Romanian 10Y yields are almost 40 basis points higher compared to the beginning of the week that maybe related to political instability as Social Democrats, the biggest pro-European party, withdrew from coalition talks. Poland announced it will begin 2025 issuance with Euro-denominated papers as US-dollar market lost some attractiveness according to Polish Ministry of Finance.

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