Poland: PPI and construction surprise on the upside
The better reading in construction points to a revival in infrastructure investment. Higher PPI inflation, meanwhile, is a global story: rising prices of commodities and chip shortages are generating higher costs, which manufacturers are passing on to consumer prices
| +5.3% |
PPI in Poland in April (YoY)consensus at +4.9% |
| Higher than expected | |
Acceleration in the PPI is a global phenomenon
In April, inflation at the wholesale level accelerated from 3.9% to 5.3% YoY, more than the market expected (+4.9% YoY). Prices in manufacturing accelerated strongly, to 5.0% YoY from 3.3% in March. Prices in the metal ore mining industry continued to rise (+60.1% YoY) due to the rebound in demand for commodities in the global economy.
Inflationary pressure in Poland is currently largely cost-driven. Raw material prices are growing, disruptions in the supply chain are forcing a reorganisation of production processes. This generates higher costs, which are transferred to the prices of finished products. This is a global trend. In April, PPI inflation in China and the US accelerated to 6.8% and 6.2% YoY, respectively. We do not yet know the reading for the eurozone, but in March it was already at 4.3% YoY vs. 1.5% YoY in February.
Producer and consumer price inflation (% YoY)
Producers are gradually passing on cost increases to consumers. In April, CPI inflation in Poland accelerated from 3.2% to 4.3% YoY, partially due to stronger growth in the price of goods. The progress in vaccination and gradual reopening of the economy will soon be complemented by pent-up consumer demand. We should also see further stimulus from the EU Recovery Fund and the Polish Deal. We estimate that the implementation of the announced changes in PIT and the launch of some of the infrastructure programmes may further boost CPI inflation by 0.2 percentage points in 2022.
| -4.2% |
Construction in April (YoY)consensus at -8.0% YoY |
| Better than expected | |
Better-than-expected construction and assembly production results
Even though April construction output was still negative compared to a year ago (-4.2% YoY), the reading was much better than in March (-10.8% YoY) and expectations (-8% YoY). While in March, all construction sub-sectors recorded year-on-year declines, in April this was true only with regard to civil engineering. Construction of buildings and specialised construction activities rose by 1.3% and 0.3% YoY, respectively. Demand for housing remains high, and the rebound in the specialised construction sector may indicate that infrastructure investment is gradually taking off.
We have to wait a bit longer for positive YoY growth in construction and assembly production. Last year's slowdown affected construction somewhat later than industry or retail sales. Therefore, the low base effect, which boosts annual growth rates in the latter areas, does not apply to this sector. Nevertheless, the results for April should be viewed positively. Adjusted for seasonality, construction and assembly output growth accelerated by as much as 5.0% month-on-month from 1.5% in March.
"THINK Outside" is a collection of specially commissioned content from third-party sources, such as economic think-tanks and academic institutions, that ING deems reliable and from non-research departments within ING. ING Bank N.V. ("ING") uses these sources to expand the range of opinions you can find on the THINK website. Some of these sources are not the property of or managed by ING, and therefore ING cannot always guarantee the correctness, completeness, actuality and quality of such sources, nor the availability at any given time of the data and information provided, and ING cannot accept any liability in this respect, insofar as this is permissible pursuant to the applicable laws and regulations.
This publication does not necessarily reflect the ING house view. This publication has been prepared solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved.
ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam).