Economic news

• CPI: May CPI inflation reading delivered a significant positive surprise. According to the flash estimate, headline inflation eased to 3.1% yoy in May from 3.2% in April, rather than accelerating to the 3.7% expected by the market. The main drivers behind the surprise were decline in food prices and lower-than-forecast core inflation. The data suggest that second-round effects stemming from higher fuel prices remain limited for the time being. Given this inflation outcome, any discussion of interest rate hikes in Poland can be set aside, and the Monetary Policy Council is likely to remain in a wait-and-see mode over the coming months, keeping interest rates unchanged. We discussed this topic in greater detail in our post-release commentary.
• RETAIL SALES: Retail sales in constant prices increased by 1.3% yoy in April, representing a substantial disappointment relative to the market consensus of 3.0%. The April reading partly reflects a normalization following the strong March performance; however, the underlying details point to signs of weaker consumer demand in the near term. We provided a more detailed assessment of these figures in our dedicated analysis.
• UNEMPLOYMENT: The unemployment rate declined to 6.0% in April from 6.1% in March, according to Statistics Poland. The reading was fully in line with both market expectations and seasonal patterns. At the same time, the Labour Force Survey unemployment rate stood at 3.3% in 1Q26, compared with 3.2% in the previous quarter. The StatOffice released only the non-seasonally adjusted LFS measure; however, the seasonally adjusted unemployment rate will most likely be unchanged or lower than in the preceding quarter, which will be confirmed once Eurostat publishes its estimates.
• PMI: Poland’s manufacturing PMI increased to 49.4 in May from 48.8 in the previous month, significantly outperforming market expectations, which had pointed to a decline to 48.5.
• FUELS: Reduced VAT and excise duties on selected motor fuels have been extended until 15 June 2026, according to regulations issued by the Ministry of Finance.
• RATING: The key risk to sovereign credit ratings across Central and Eastern Europe, including Poland, is the fiscal position, particularly the lack of prospects for medium-term fiscal consolidation, according to Karen Vartapetov, S&P Global Ratings’ lead analyst for Poland. He noted that Poland’s debt-to-GDP ratio remains moderate by international standards, although debt servicing costs continue to be relatively high.
• CONSUMER: Consumer inflation expectations in Poland declined to 24.7 points in May from 29.4 points in April, according to European Commission data. Respondents are asked about their expectations for price developments over the next 12 months. Meanwhile, the European Commission’s Economic Sentiment Indicator (ESI) for Poland increased to 100.1 in May from 99.2 in the previous month.

Investment geared up in 1Q26 despite chilly weather conditions

Last Monday, the Central Statistical Office (GUS) published rather weak retail sales figures for April – we covered them in detail in our commentary. At the same time, data on the financial performance of non-financial enterprises in the first quarter was released. Those figures were interesting for many reasons – let’s start with the fact that the first quarter saw a further improvement in margins within the sector. We will, however, focus on investment, which rose by 8.7% y/y in real terms. Why is this a good result?

• This was the fastest growth in investment by non-financial corporations (NFC) since the end of 2023.
• Investment in manufacturing rose for the first time since the 4Q23, though this is, of course, only the beginning of the process of closing the investment gap that has built up over previous years.
• Investment rose across all major categories.
• The rise in investment was so robust despite the disruptions caused by the prolonged, freezing winter. Expenditure on buildings and structures rose by 5.4% despite a 7% yoy decline in construction and assembly output.

NFC investment, selected sectors (current prices, 4QMA, change from 2023)

Source: Statistics Poland (GUS), Pakao Research

Capital expenditure in the first quarter was by far driven by the public sector – the dominance of transport in the year-on-year growth figures is telling in this regard, but at the same time there were initial signs of a recovery in activity among private sector entities, in manufacturing and selected service sectors. These figures paint a brighter picture of private investment than the one outlined in our assumptions for this year. Nevertheless, the investment decisions that resulted in these figures had been made before the outbreak of the Gulf War and may not be followed through due to the deteriorating economic environment, the expected slowdown in economic growth and rising uncertainty.

NFC investment vs total fixed asset formation (constant prices, % yoy)

Source: Statistics Poland (GUS), Pekao Research

Prior to the release of data on corporate capital expenditure, we had assumed that total investment in the Polish economy had fallen by 1.5% yoy in the first quarter due to the dampening effect of the long winter. Following their release, we would assign an upside risk to this forecast – the investment outcome may have turned out better due to a further acceleration in investment in transport equipment, and machinery and equipment. It is also worth noting that in recent months, positive indicators for investment have begun to accumulate: capacity utilisation in industry has started to rise again, financing of fixed assets is one of the main drivers of growth in demand for corporate credit, investment lending has accelerated significantly, and the value of new investment projects soared in the second half of last year. 2026 was set to be a year of investment, and that is exactly how it is beginning.

Financial markets update

The positive sentiment on the major markets translated into a strong week on the domestic front. The zloty strengthened and government bonds took a breather. EUR/PLN even tested the 4.23 level, thus hitting the low from mid-April. The test has so far been unsuccessful, but we should expect to see it repeated soon. This week’s key event will be the MPC meeting. We do not foresee any changes to interest rates, neither upwards nor downwards. The unexpectedly low inflation reading for May, released on Friday, has dampened expectations of interest rate hikes in Poland in the coming months. We believe the NBP will wait out the upcoming inflation plateau, even if the ECB decides on symbolic rate hikes in the meantime.