Economic news

• RETAIL SALES: Retail sales growth slowed from 3.8% yoy to 3.3% yoy in September, somewhat more than expected by the market consensus (3.6% yoy). The slowdown was entirely driven by fuel sales, which fell by 17% compared with August. This was, of course, a consequence of the CPN programme: fuel prices were reduced during the final two weeks of August, whereas the programme was suspended throughout September before being reinstated in October. At the same time, sales of durable goods accelerated, particularly motor vehicles and parts (13.1% yoy) as well as household appliances and furnishings (10.7% yoy). Overall, there is little cause for concern in goods consumption. The impact of slower household income growth, resulting from higher inflation, is more visible in services consumption. We therefore expect private consumption growth to slow to 3.0% yoy in 2026, from 3.9% yoy in 2025. We discuss the retail sales release in more detail in our dedicated commentary.
• INDUSTRY: Industrial production increased by 4.6% yoy in September and was 17.0% higher than in August, significantly outperforming the market consensus (3.1% yoy). Construction and assembly output, by contrast, disappointed, falling by 9% yoy against expectations for growth of more than 3% yoy, largely due to delays in revenue recognition by construction firms. We discuss both releases in greater detail in our data commentary.
• LABOUR MARKET: Average wages in the enterprise sector increased by 5.9% yoy in September, broadly in line with both our forecast and the market consensus (6.0% yoy). The acceleration was driven primarily by the trade and agriculture and forestry sectors. Employment declined by 0.8% yoy, unchanged from the previous month. We discuss the labour market data in greater detail in our dedicated commentary. Meanwhile, the registered unemployment rate remained at 5.8% in September, according to Statistics Poland (GUS). The Ministry of Family, Labour and Social Policy had earlier estimated the same figure. The reading was fully consistent with seasonal pattern. The number of registered unemployed stood at 907 thousand.
• MPC: MPC member Ludwik Kotecki argued that the Council is likely to respond to elevated inflation only if it sees evidence of second-round effects from higher energy prices that could threaten core inflation. Meanwhile, MPC member Marcin Zarzecki told Bloomberg that he does not expect a rate hike in November, although he does not rule one out. Among the factors that could justify tighter monetary policy, he cited zloty weakness, inflation remaining above 3.5% for at least three months, and wage growth accelerating to 7% yoy or higher.CPI second-round effects are looming over horizon.
• PRICES: Producer price inflation (PPI) accelerated to 6.1% yoy in September, above both the market expectation (5.7% yoy) and the August reading (4.8% yoy, revised up from 4.2% yoy).
• SENTIMENT: Consumer sentiment deteriorated markedly in October. The current consumer confidence indicator fell from -10.8 to -14.0, while the forward-looking indicator declined from -7.9 to -10.6. This was the largest single-month deterioration since July 2025. Nevertheless, it does not materially change our assessment of the Polish consumer. Since 2023, consumer confidence indicators have broadly moved sideways.
• MONEY SUPPLY: Broad money (M3) was 12.5% higher yoy in September, substantially above the market consensus (11.5% yoy). The increase was driven primarily by stronger household deposits and growth in currency in circulation. On the lending side, credit growth was strongest among financial corporations (+4.0% yoy) and the public sector (+3.9% yoy), while growth remained subdued among non-financial corporations (+0.7% yoy) and households (+0.8% yoy).
• DEBT: The Ministry of Finance sold PLN 14.8bn of government bonds last week, against demand exceeding PLN 18bn. The auction was somewhat larger than those conducted in recent months, while strong demand reflected attractive valuations in the domestic bond market. In addition, the Ministry has begun pre-financing 2027 borrowing requirements, which now amount to approximately 3% of the annual funding needs envisaged in the Budget Act.
• BUDGET: Fiscal notification data and quarterly general government statistics brought some encouraging news. First, according to the fiscal notification, the general government deficit is expected to reach 7.06% of GDP, representing a slight improvement compared with the previous year (7.2% of GDP, following revision). Second, Eurostat data indicate that the general government deficit fell to 5.6% of GDP in the first half of the year (seasonally adjusted), while the rolling four-quarter measure continued to trend lower. This suggests that the official forecast for this year’s fiscal deficit may prove somewhat overstated, although much will ultimately depend on budget execution during the final months of the year.

Second-round effects in the CPI are looming over horizon

We are all looking for second-round effects in inflation – that is, the indirect consequences of sharp rises in fuel and energy prices. The Monetary Policy Council is also on the lookout for these, with many of its members having recently indicated that a tightening of monetary policy will only be justified once these effects actually materialise and begin to cast a shadow over the core inflation stability. The MPC’s reaction function is therefore clearly adaptive in nature: the Council wants to see the effects of the shock before deciding on any action. This contrasts with the European Central Bank, which had proactively decided to raise interest rates before the impact of higher fuel and energy prices on prices across the wider economy became more apparent.

In Poland, clear second-round effects on consumer inflation are not yet visible, but warning signs are gradually emerging in other, potentially leading indicators. Last week we learnt that producer price inflation (PPI) accelerated to 6.1 per cent year-on-year in September, reaching its highest level since April 2023. As early as the previous month, producer price inflation had exceeded consumer price inflation, which historically has often signalled a subsequent rise in the latter.

Fuel prices remain the primary driver of producer price inflation, but the acceleration in prices across the broad category of industrial processing is noteworthy. In September, this category contributed over 1 percentage point to the overall PPI growth rate. This is a significant signal indicating that price pressures are beginning to extend beyond the energy components directly affected by the shock. Admittedly, against the backdrop of the 2022–2023 crisis, the current figures may not yet seem particularly menacing. However, this does not mean they can be dismissed. Something is beginning to happen.

PPI inflation in subcategories (% yoy, p. pts.)

Source: Statistics Poland, Pekao Research

Higher producer costs are likely to gradually feed into consumer inflation, particularly in the prices of goods, which are more directly exposed to rising energy and transport costs. Inflation in the services sector, on the other hand, is more dependent on the situation in the domestic labour market, where wage pressure currently remains moderate.

Historical data suggest that the pass-through of changes in producer prices to consumer prices may be delayed by around two quarters. If current trends persist, a more pronounced impact of the energy shock on the CPI can be expected around the turn of 2026 and 2027. An additional impetus may come from the traditional price revisions at the start of the year, when firms adjust their prices to new cost conditions. The start of 2027 may therefore be the period when the pressure currently evident in producer prices becomes more clearly reflected in the prices paid by consumers.

Core PPI inflation vs core CPI inflation of goods (% yoy)

Source: Statistics Poland, Pekao Research

Even if in November the majority of the Council still votes to keep interest rates unchanged, rate rises in the coming months seem increasingly likely to us. In our view, over the next year at least, inflation may remain above the upper limit of the NBP’s permissible deviation band from its inflation target. By waiting for a clear rise in core inflation, the Monetary Policy Council risks reacting too late. By the time price pressures become visible in the CPI, part of the adjustment process may already be well underway, and curbing it will subsequently require a more significant tightening of monetary policy.

Financial markets update

The FX market really, really did not like the rise in risk aversion towards the end of the week, whatever the reasons. Volatility also increased. As a result, the zloty weakened to above 4.40 against the euro (for the first time since early 2024) and 3.90 against the US dollar. The former currency pair currently looks very favourable from a bullish perspective – there is scope for further gains, extending as far as 4.46. Conversely, a technical analyst would regard the USD/PLN pair as risky (a potential double top), but here too the scope for further gains is significant. In the fixed income market, meanwhile, we have observed a downward drift, but the market is reacting asymmetrically to developments abroad: rises in yields on core markets are a cause for caution or a sell-off in government securities, whilst falls do not trigger corresponding movements in government securities. This is a rather peculiar situation, and likely temporary – perhaps government bonds are taking a hit as a knock-on effect from the FX market, or perhaps investors are exercising caution due to idiosyncratic factors (domestic fiscal policy). Global factors will dominate in the coming days, with two exceptions. On Wednesday, we can expect another auction of government securities (the previous one was successful, but did not translate into falls in government bond yields) and the release of inflation data. The latter will contribute to shaping expectations regarding the NBP’s interest rates in the coming months. Given the above, we would expect the zloty to weaken further and SPW yields to fall in the coming days.

Review of upcoming macroeconomic figures

30 October, CPI flash October, Pekao: 3.7% yoy  Previous month: 4.1% yoy

The reinstatement of the CPN programme will give inflation some breathing space, with the rate falling below 4 per cent year-on-year in October. Fuel prices at petrol stations have fallen by over 10% over the past month. At the same time, following a prolonged period of decline, food prices are beginning to rebound, whilst energy prices – particularly those of heating fuel and gas products – are also likely to have risen further. The effects of the second round are not yet clearly visible in the broader basket of core goods and services, but what is delayed is not lost – core inflation may therefore rise to 3.2 per cent year-on-year in October.