PPoland: Retail sales confirm solid domestic demand

• Sales in the retail sector were up 1.6% m/m in August. The yearly dynamics thus sped up to 11.5%, from the 11.0% seen in July. This figure was slightly higher than we and the market expected (10.4%). Polish households spent more money on fuel, books and newspapers, but a significant jump was recorded in the category of household goods (+16.9% m/m).
  
  
• Such a structure signals that the purchasing power of Poles is on the rise. Improving labor market conditions are certainly one of the factors to thank. A separate report from the Statistical Office showed that the unemployment rate dipped to 15.5% in August, which is the lowest level in nearly six years (since January 2001).
  
  
• The data has a neutral impact on the monetary policy outlook, as it does not change the picture of the economy. It has been obvious for a long time already that the booming economy is helping to create new working opportunities, curb unemployment and improve the financial situation of households. As a result, the consumption of households should remain one of the propelling forces of the economy in the third quarter of this year. The inflationary impacts of ballooning domestic demand is important for policy makers. Even though the core inflation indicators have risen over the previous couple of months, they are all still muted, hovering below the 1.5% level. The central bank should have leeway to wait with a first rate hike until next year.
  
  
• The markets should not react to the data. Attention is focused instead on the political scene and the upcoming MPC meeting (on Wednesday).

Erste Bank
http://global.treasury.erstebank.com

Source:By Mária Fehérová,