Recent indicators suggest that the Polish slowdown may have reached a trough in Q1, when GDP growth was a paltry 0.5% (y-o-y). The strength of any upturn remains unclear, but private consumption in Q2 is likely to have been buoyed by falling unemployment. The jobless rate, while high, dropped for a third consecutive month to 13.5% in May. Retail sales have also started to improve and, the 0.5% (y-o-y) expansion in May beat expectations. Meanwhile, exporters received some relief as news that the US Federal Reserve could taper its asset purchases later this year, on the back of the recovery in its economy, caused a softening of the zloty. Furthermore, business confidence in Germany, Poland’s largest export market, improved a little in June. Industrial production unexpectedly rebounded 3.0% (y-o-y) in the same month, after a 1.8% fall in May. However, the outlook for the manufacturing sector dimmed as the latest PMI reading slid to a 35-month low of 48.0.
Inflation eased from 0.5% (y-o-y) in May to 0.2% last month, well below the 1.5% lower bound of the central bank’s (NBP) target range. The NBP cut its reference rate by 25bp to a new record-low of 2.5% on July 3, but policymakers have stated that further monetary easing this year is extremely unlikely.
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