CPI inflation confirmed rising to 2.6% y/y in Poland

Polish CPI inflation quickened to 2.6% y/y in June from 2.4% in May, matching the inflation estimate and accelerating to the highest level since November 2012, according to final figures from the Statistics Poland (GUS) published Mon. The print exceeded the original consensus expectation of 2.4% y/y. Powering inflation forward in the month was mainly food and non-alcoholic drink prices, which accelerated to 5.7% y/y, the highest since November 2017. In one-month terms, CPI rose 0.3% m/m, up from 0.2% in May and 0.1% a year earlier. Inflation rose to 1.8% y/y in Jan-Jun, up from 1.7% in the previous period.

Food and non-alcoholic beverage prices rose 0.3% m/m, well down from 1.4% but up from -0.2% the year before. That helped pushed up the annual rise to 5.7% y/y in June, up from 5.0% the month before the be the strongest since November 2017. Food prices themselves rose 6.0% y/y. Food prices are being pressured up by the drought seen last year (vegetable prices up 27.3% y/y) and by African Swine Fever in China, which is leading to sharply higher pork prices (meat up 6.0%, pork up 10.6%). Sugar prices were also up sharply (rising 23.3% y/y). In the end, we calculate that food and non-alcoholic drink prices added 1.4pps to y/y inflation, up from 1.2pps in May to be the highest since November 2017.

Most of the other components did not have a very different impact on end inflation than they did the previous month. Fuel price pressure eased to 3.0% y/y from 4.1% the month before. The energy-price decline was -0.9%, which was revised down from the -1.0% flashed by GUS before. It continues to be true that if the government had not artificially frozen power prices, there would be much more inflation pressure than actually being seen.

Services price growth was fast in a sign of strong demand. Such prices rose to 3.9% y/y from 3.3% the month before. Goods price inflation accelerated to 2.2% y/y from 2.0% the month before. In line with the services price growth, we forecast that net core inflation, the NBP’s main inflation indicator, will jump to 1.9% y/y in June from 1.7% the month before in what stands to be the fastest rise since October 2012.

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