In Poland CPI inflation confirmed jumping to 2.9% y/y

Polish CPI inflation jumped to 2.9% y/y in July from 2.6% in June, to mark the fastest pace since way back in October 2012, according to final figures from the Statistics Poland (GUS). The print confirms the flash estimate released in late July. Food and non-alcoholic drink prices were the main engine behind the faster price growth, though services prices continue to heat up as a still quickly growth economy seems to be creating some inflation pressure. In one-month terms, CPI was flat, compared with a 0.3% m/m rise in June and a 0.2% fall the year before. In Jan-Jul, inflation heated up to 2.0% y/y from 1.8% after June.

Food and non-alcoholic beverage prices rose 0.3% m/m, well up from -0.5% the year before in an unseasonal rise. That helped push the annual rise to 6.8% y/y in July from 5.7% the month before to be the strongest rise since May 2011. Food prices themselves rose 7.3% y/y, up from 6.2% in the biggest rise also since May 2011. Food prices are being pressured up by the drought seen last year (vegetable prices rose 32.4% y/y) and by African Swine Fever in China, which is leading to sharply higher pork prices (meat up 6.7%, pork up 12.4%). Sugar prices were also up sharply (rising 28.4% y/y). In the end, we calculate that food and non-alcoholic drink prices added 1.7pps to y/y inflation, up from 1.4pps in June.

Curbing the food price impact were fuel prices, which slowed to 0.7% y/y in July from 3.0% in June. That is the slowest pace since March 2018. The fuel contribution fell to zero from 0.2pp in June and thus the CPI jump could have been even bigger had it not been for relatively low global prices.

Most of the other components did not differ much from the June data. The energy-price decline was -1.0%, which was flashed by GUS in late July. 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 4.2% y/y from 3.9% the month before. Goods price inflation accelerated to 2.4% y/y from 2.2% 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 2.2% y/y in July from 1.9% the month before in what stands to be the fastest rise since July 2012 (2.3%).

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