Polish activity data slows further in 2Q but 3.4% growth still achievable for 2026

May retail sales and construction output disappointed, and GDP growth in the second quarter is set to fall below the 3.5% YoY rate seen in the first quarter. Despite softer consumption, strong investment should keep 2026 GDP growth at 3.4%. Wages show no second-round energy effects, allowing the central bank to keep rates on hold in the coming quarters.

Consumer strength moderated further in 2Q26

The prolonged conflict in the Middle East most likely weighed on consumer spending patterns in 2Q26. In May, retail sales growth rebounded to 3.0% year-on-year from 1.3% YoY in April, as part of Easter spending had already taken place in March, but the result still disappointed relative to expectations. Although fuel price growth was contained by government measures (lower excise duty, VAT reduction and price caps), demand for petrol and diesel in May was not as robust as in the previous months. Consumers appear less concerned about potential supply shortages and more sensitive to the prevailing level of fuel prices. Food purchases declined for a second consecutive month, while annual growth in durable goods purchases was weaker than at the beginning of the year. Consumer confidence began to improve after bottoming out in April, and private consumption should remain a solid pillar of economic growth this year, albeit likely to a lesser extent than in 2025.

Construction output rebounding, but infrastructure activity disappointed

Following sharp declines in 1Q26 due to harsh weather conditions, the recovery in construction output continued in May, with production increasing by 3.9% YoY after 4.5% YoY in April. However, there were some signs of weakness, particularly in civil engineering, which fell by 1.8% YoY. We expect activity in this segment to pick up going forward, as the time window for executing projects financed under the Recovery and Resilience Facility (RRF) narrows. We anticipate that stronger fixed investment over the remainder of the year will offset the slowdown in consumption growth.

Overall, real economy data for May suggests that GDP growth slowed further in 2Q26 from 3.5% YoY in 1Q26 but remains on track to reach 3.4% in 2026 as a whole.

No signs of second-round effects in the labour market

In May, wages in the enterprise sector rose by 5.8% YoY, surprising slightly to the downside, while employment continued to decline (down 0.9% YoY). There is no evidence of wage pressure or second-round effects from the current energy shock, which alleviates pressure on services prices and core inflation. The labour market continues to adjust following several years of double-digit wage growth. Firms are adapting to higher labour costs, and wage demands are being contained amid anchored inflation expectations.

National Bank of Poland set to keep rates on hold

A less tight labour market, somewhat slower economic growth, and an inflation outlook showing limited pass-through from the energy shock provide the central bank with sufficient comfort to maintain a wait-and-see stance. CPI inflation may return to the NBP’s target as early as 2Q27, as the impact of elevated oil prices is expected to remain contained and unlikely to spread broadly across the consumer basket. We continue to expect policymakers to keep rates on hold, with the next move likely to be a cut, although its timing appears some way off.

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