Economic news

• RETAIL SALES: In November retail sales in Poland has grown by 3.3% yoy – slightly below consensus of forecasts and the October reading (5,4% yoy). Nevertheless, consumption growth in Poland remain robust at the end of 2025.
• MANUFACTURING: Industrial production has declined by 1,1% yoy in November which came as a significant disappointment, given that production posted solid gains in September and October, while the consensus forecast stood at +2.9% yoy. We had expected an underperformance (our forecast was +0.5% yoy), but not of this magnitude. In our view, the main reasons were an unfavorable calendar effect and weak demand in export markets. We believe that industrial output should return to a growth path in the coming months. Our detailed comment on the release can be found here.  
• LABOUR MARKET: Wage growth in the enterprise sector unexpectedly accelerated from 6.6% to 7.1% yoy in November. However, the entire surprise was driven by a single sector: transportation and warehousing. As a result, we expect this to be a one-off effect, with wage growth continuing to slow in the coming months. We discuss this in more detail here.
• INFLATION: Core inflation stood at 2.7% yoy in November, its lowest level in six years, bringing it back to pre-pandemic levels. It decelerated rapidly over the past month, down from 3.0% yoy in October. We believe that core inflation will remain close to the inflation target over the next year. One reason to be optimistic is prices of energy. Last week the Energy Regulatory Office (URE) approved electricity tariffs for 2026. The average electricity price under the new tariffs will amount to PLN 495.16/MWh next year. For comparison, in 2025 electricity prices were frozen at PLN 500/MWh, while the average market price outside the freeze mechanism stood at PLN 572.64/MWh. At the same time, an increase in distribution charges (by 7.6% yoy for households) and a sharp rise in the capacity fee (by around 50% yoy) will mean that, on balance, the average electricity bill will increase by around 2.5% yoy. Which is a rather moderate pace.
• RATES: L. Kotecki delivered a rather conservative assessment, stating that a wait-and-see approach is likely to be maintained until March or April (i.e. until the introduction a new methodology of calculating inflation (COICOP reform) and the NBP’s March macroeconomic projections). In his view, the remaining room for further rate cuts is limited to at most two. Kotecki also noted that the MPC had decided to cool market expectations regarding the interest-rate path.

A mixed picture of the Polish labour market in the third quarter

Despite relatively strong GDP growth, the Polish labour market has been sending mixed signals at best about its underlying condition. Some signals were genuine, some were distorted by regulatory measures, such as unemployment rate. In June this year, a reform of labour offices was implemented, which led to a significant increase in the registered unemployment rate, from 5.0% in May to 5.7% in November. In orders to assess the true condition of labour market in Poland we decided to look into a last edition of the Labour Force Survey (LFS) conducted by Eurostat, which follows a methodology distinct from Statistics Poland (GUS) and does not rely on data from labour offices to compile its indicators.

According to the latest LFS data, the third quarter did indeed bring a slight deterioration in labour market conditions. Specifically, the unemployment rate increased from 3.0% in Q2 to 3.2% in Q3, broadly matching the increase observed over the same period in 2024 (using seasonally adjusted data). An unemployment rate at this level was last observed in 2021. It is worth noting, however, that despite this increase, Poland remains among the EU countries with the lowest unemployment rates—currently placing third, behind Malta and the Czech Republic.

Unemployment rates divergence in Poland

Source: StatOffice, Eurostat, Pekao Research

A subtle shift toward a so-called “employer’s market” is also suggested by other indicators, such as labour market slack, i.e. the measure of unused labour resources. This indicator captures the share of individuals who would like to work or could potentially work relative to the total labour force. In the third quarter, it reached its highest level in the past four years. This points to a labour market that is becoming progressively less absorptive.

Labour market slack indicator for Poland, %

Source: Eurostat

There is also positive news. While the unemployment rate is rising, there are strong indications that the main driver of this trend is a generally positive phenomenon—namely, higher labour force participation and an inflow of new workers into the labour market (either first-time entrants or returnees). Over the past two quarters, we have observed a step increase in labour force participation, both in relative terms (as a share of the population) and in absolute numbers, continuing a trend that has been in place for many years.

On the other hand, under current market conditions this trend may weigh on employers, who—amid heightened uncertainty—remain reluctant to hire, particularly given the persistently high labour costs.

Labour market activity rate in Poland, %

Source: Eurostat

To sum up, the Polish labour market has deteriorated slightly in recent months, although to a much smaller extent than suggested by domestic registered unemployment data. Signs of weaker labour demand are visible not only in the unemployment rate, but also in underemployment and job vacancy data; however, these figures are neither alarming nor indicative of recessionary conditions. That said, it is difficult to envisage the domestic labour market shining as brightly in the near term as it did in 2021–2022. The coming year is therefore likely to be characterised by a modest decline in the registered unemployment rate to around 5.5%, and a fall in the LFS (BAEL) unemployment rate to around 3% or slightly below.

Financial market update

The domestic financial market is ending the year on a strong note. Last week, the zloty appreciated sharply, at one point even touching 4.20 per euro. It pulled back slightly on Friday, but this does not change the overall picture of the Polish currency’s strength. Domestic government bonds also gained over the past week.

We see two factors supporting Polish assets. First, solid economic growth this year and the prospect of it being sustained next year. Second, a favourable international environment: trade wars have lost momentum (and are not escalating), and although peace talks between Russia and Ukraine are dragging on, they still offer some hope of a freezing of the war on Poland’s eastern border in 2026.

Today’s calendar includes, in theory, several important data releases—retail sales and M3—but they are unlikely to have a material market impact. Investors are already in holiday mode, so we expect the zloty and government bonds to stabilise close to current levels.