Poland weekly focus: Real economy data for January

Labor market statistics to remain solid despite pandemic. Negative calendar effect to weigh on industrial production performance. Restrictions dragged retail sales down after recovery observed in December. MinFin to hold bond auction. NBP to buy bonds on market.

February 17 | Solid labor market in January. The situation on the Polish labor market remains good despite the pandemic. Wages and employment likely also sustained the growth dynamics observed in recent months at the start of the year. We expect wage growth to land at 5.4% y/y and employment growth at -1.1% y/y. According to the initial estimates of the Ministry of Development, Labor and Technology, the unemployment rate inched up by 0.3pp to 6.5% in January.

February 18 | Negative calendar effect weighed on industry. After double-digit growth in December, the manufacturing sector will mark a weaker start to the year, as the negative calendar effect (-2WD) will drag industrial production growth down. We expect industrial output to increase by 2.7% y/y, above the market consensus of 1.0% y/y. In our view, improving manufacturing sentiment as well as the low base from last year will partially offset the unfavorable calendar effect.

February 19 | Restrictions weighed on retail sales in January. After the easing of restrictions in December and reopening of retail stores in shopping malls, those have again been closed for the whole of January. Moreover, the school semester break that is usually scheduled for the January-February period was shifted into the first two weeks of January 2021. In fact, it was effectively canceled, as hotels and skiing slopes remained closed, likely additionally weighing on retail sales. We therefore expect retail sales to drop by -5.9% y/y, somewhat more than market expectations of -5.0% y/y.

Bond market drivers | 10Y yield continues to increase. Since the beginning of February, the long end of the Polish curve increased by almost 20bp, supported by developments on core markets as well as better than expected GDP growth and diminishing chances for the further easing of monetary policy in Poland. Last week, yield increases were observed along the whole LCY curve, reflecting core market developments. On February 18, the MinFin holds a regular bond auction. Details of the bond supply are usually released two days ahead of the auction. Moreover, the NBP is scheduled to buy bonds on the secondary market on February 17.
FX market drivers | Zloty moves below 4.50 vs. EUR. Over the course of the week, the zloty depreciated towards 4.50 vs. the EUR, despite the weakening of the USD. However, in the last two weeks, the EURPLN has been quite stable and remained in a narrow range between 4.48 and 4.50. The strong upside surprise that came from January’s inflation was positive for the zloty, as it likely rules out any further monetary easing.