Poland: Core inflation increases
Core inflation came in above expectations in August. Its growth, however, seems unsustainable as it likely resulted from legal and methodological changes
The final CPI reading confirmed a 2% year-on-year increase in August. The deceleration of fuel prices (from 18.0 to 15.3% YoY) and prices of food (from 2.2 to 2.1% YoY) were offset by a regulatory increase in gas tariffs, which added 0.05 percentage points to the headline figure.
Core inflation accelerated from 0.6% YoY to approximately 0.8%-0.9%, above our estimates based on the flash reading. It was mainly driven by clothing & footwear prices (the Central Statistical Office changed its methodology in March) and insurance prices (prone to regulatory changes). Among the demand-driven categories, stronger growth took place only in hotels & restaurants, and this is likely to moderate in the coming months. This structure does not provide any evidence for a rapid increase of core inflation in 4Q18.
Overall, we expect CPI to decelerate in 4Q18 to approximately 1% YoY in November due to a deceleration of fuel and food prices. This inflation weakness, however, should be temporary – a return above 2% YoY is projected in 1Q19 due to an increase in energy tariffs and the expiry of other effects currently dampening core inflation.
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
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