Economic news

• RETAIL SALES: June’s retail sales came in well below expectations, rising by just 2.2% y/y versus the market consensus of 4.1%, capping off a mixed set of real-economy data. Despite the disappointment, the outlook for consumption remains moderately positive, supported by rising real wages, improved sentiment, and anticipated interest rate cuts. The full comment to the data can be found here.
• LABOUR MARKET: In June, the unemployment rate rose to 5.2% from 5.0% in May (against forecasted 5.1%), though this uptick largely reflects regulatory changes, such as easier registration rules, rather than a real deterioration in labour market conditions. Around 30,000 newly registered unemployed were likely already out of work before the reforms, a topic which we discuss further in a comment below. At the same time, corporate wage growth accelerated to 9.0% y/y, surprising the market and suggesting a temporary pause in wage cooling. Strong underlying pay dynamics may slow core disinflation ahead. A more in-depth analysis of wage pressures can be found here.
• MANUFACTURING: June’s industrial output disappointed, falling 0.1% y/y versus expectations of a 1.6% rise, mainly due to weakness in mining and energy (more on that in the comment here). In contrast, construction surprised to the upside, growing 2.2% y/y against a projected decline.
• CONSUMER CONFIDENCE: July’s consumer sentiment data confirmed that June’s rebound was short-lived, with the current confidence index (BWUK) falling to -14 from -9.3 and the future expectations index (WWUK) down to -7.7 from -4.6. The figures highlight a continued disconnect in Poland between solid macro data and persistently downbeat consumer sentiment.
• DEBT: Following Wednesday’s bond auction, the Finance Ministry said around 84% of Poland’s 2025 borrowing needs are already covered. It placed PLN 12.3 billion in bonds, with PLN 10.98 billion sold in the main sale, reaching the upper end of the PLN 6–11 billion target against the demand of PLN 14.22 billion. Separately, Eurostat reported that public debt under the ESA 2010 methodology rose to 57.4% of GDP in Q1, the fastest increase in the EU.

Regulatory confusion over unemployment rate in Poland

The recent release of macroeconomic variable that generally doesn't attract much market attention has caused a lot of confusion in Poland. The registered unemployment rate rose to 5.2% in June from 5.0% a month earlier. This was a significant surprise, as the increase in the unemployment rate and the number of unemployed in June is a rare anomaly (in recent years, this situation occurred only during the pandemic-hit 2020), completely contrary to the seasonal pattern and market expectations which predicted a decline to 4.9%. June is, after all, a month in which unemployment always declines due to the strong increase in demand for seasonal workers.

Registered unemployment rate (%)

Source: Statistics Poland, Pekao Research

However, this unexpected hike in the unemployment rate is not due to a sudden deterioration in the labour market, but rather to regulatory changes. A reform of labour offices came into effect in June, allowing the unemployed greater flexibility in the labour office registration process: in particular, registration will be possible at their place of residence (instead of their registered address, as was the case previously), and the group of people eligible for being registered as unemployed has been expanded to farmers. Previously, farmers with more than 2 hectares of land could not register as unemployed. The new regulations removed this limit, allowing registration regardless of farm size. In short, the definition of an unemployed person has been broadened.

Therefore, we assume that approximately 25-30k new unemployed who entered the system between May and June were people who formally registered as unemployed after the new law came into effect. Who exactly are these people? According to detailed data published last week by the Central Statistical Office, we can estimate that the vast majority of new people who appeared in labour office statistics are:

• men (who accounted for 80% of the new inflow in June),
• people aged 25-44 (60% of the new inflow),
• those with primary and vocational education (70% of the new inflow).

The above characteristics indicate that the majority of people, who had previously remained outside the unemployment system and were now able to register, are farmers. Moreover, statistics confirm that many people registered as unemployed thanks to the option of registering outside their place of residence, rather than at their registered address, as was previously the case. This is evident in the June significant jump in registrations in major cities: Łódź +1.3k, Wrocław +1.1k, Warsaw nearly +1k, Białystok +0.7k, Szczecin +0.6k, Poznań +0.5k.

Another aspect of the June unemployment data is the very significant decline in the number of job offers submitted to labour offices. In June, employers reported only 32.9k new offers – three times less than a year earlier and even less than during the Covid-19 pandemic epicentre in 2020. Looking at historical results from recent years, we can see that the number of job offers typically increased during this period (due to seasonal work). This can also be attributed to regulations in the new law. From now on, public employment services will be required to more thoroughly verify companies submitting their job offers, including by checking employers for financial arrears. Moreover, the so-called labour market test, which requires reporting a job to verify, before entrusting a job to a foreigner, whether there are any unemployed or job-seeking individuals in the local market whom the employer could employ, has been abolished.

Number of job offers reported to labour offices (ths, seasonally adjusted)

Source: Statistics Poland, Pekao Research

To sum up, the June anomalies can be attributed to new regulatory changes. It should be assumed that their impact will likely be felt in the coming months, increasing the seasonally adjusted unemployment rate by at least another 0.1-0.2 percentage points compared to previous forecasts. All forecast paths for the unemployment rate should be revised upwards, by approximately 0.4 percentage points compared to the initial assumptions. Nevertheless, the labour market forecasts remain optimistic. The fundamentals of the Polish economy and company declarations indicate that employment in Poland will remain at a safe level. We assume that at the end of 2025 the unemployment rate will be at 5.3%.
 

Financial market update

This week has been greeted with calm spirits in the Polish markets: the dollar remains around PLN 3.62, while the EURPLN has slightly decreased (from 4.255 on Friday to below 4.250 now). 10Y POLGB yield opens around 5,50 due to last week’s uncompensated growths. Theoretically, a positive surprise on Thursday's CPI inflation reading could prompt investors to make additional purchases in the FI market, but there is little room for such a surprise and we believe that concerns about further fiscal expansion will prevail – as a result, POLGBs yields should not fall by much. On the Warsaw Stock Exchange, on the other hand, Sunday's reports on the success of the EU-US trade agreement triggered the first gains in several days, and the WIG20 index opens slightly above 2980 points today. We will not be surprised if the increases on the Warsaw Stock Exchange continue this week.