Industry and retail recovered in October

Economic developments

In October 2023, industrial production decreased by 6.6% y/y in the euro area and by 5.5% y/y in the EU, while the volume of retail trade was down by 1.2% y/y in the euro area and by 0.9% y/y in the EU according to the latest Eurostat releases. As far as CEE region is concerned, we have seen both sectors expanding in several countries. The retail sector (excluding sale of motor vehicles) seems to have been the strongest in Croatia in October, as it grew by 2.8% y/y. Poland and Romania also saw positive growth dynamics. As for the industrial production, the October’s output was higher in Czechia, Croatia, Slovenia, Slovakia and Serbia compared to the last year. More importantly, however, the October’s growth dynamics suggest an improvement compared to the third quarter. Such development is in line with our scenario of economic recovery in 2024.

Market developments

The CEE currencies seem to have benefited from global development as they strengthened against the euro on Wednesday. The Fed held the interest rates unchanged but there are first signs that US Fed is changing course. Today, the ECB holds a rate setting meeting. A change in key interest rates can be virtually ruled out but the statement will be analyzed looking for the signs when monetary easing may come. The bond market seems to reflect on expectations for upcoming interest rate cuts as the long-term yields went down on the core markets and the region followed that development. As for the monetary policy in the region, Hungary and Czechia will have central banks’ meetings next week. While Hungary should continue with easing, decision of the Czech central bank open. Zamrazilova said, though, that pricewage spiral risks are over and inflation is on track to fall toward 3%. She remained concerned about the price jumps at the beginning of the year though. The ViceGovernor Frait said though that central bank can start with monetary easing.

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