Poland GDP Q1 2008

Polish gross domestic product grew an annual 6.1 percent, compared with a revised 6.4percent in the previous three months, the Central Statistical Office in Warsaw said today. This rapid first-quarter growth may persuade policy makers to increase borrowing costs as a 10 percent gain in wages and record- high employment boost demand and inflation.



Domestic demand grew 6.3 percent, while consumer demand increased 5.6 percent. Investment rose 15.7 percent, construction gained 16.7 percent and production grew 6.9 percent, the statistics office said.

The Polish economy is expected to grow by "around 6 percent" in the current three-month period as domestic demand remains robust, Deputy Finance Minister Katarzyna Zajdel-Kurowska said.


The zloty strengthened to 3.3732 per euro as of 12:49 p.m. in Warsaw from 3.3790 yesterday. The yield on the benchmark five-year bond rose 2.9 basis points to 6.438 percent.

Polish Central Bank Leaves Interest Rates Unchanged in May

Poland's Monetary Policy Council left interest rates unchanged in May for a second consecutive month as it awaits more data on inflation and economic growth before making any further increases. Rate setters kept the seven-day reference rate at 5.75percent at their meeting this morning.



The central bank has raised rates seven times in the past year to curb inflation as rising salaries and record-high employment spur consumer demand.

Poland's inflation rate unexpectedly fell back in April, a factor which has also evidently influenced today's decision. The rate slipped to 4 percent from 4.1 percent in March. Consumer prices gained 0.4 percent in the month.




Unemployment has been falling steadily, and using the EU harmonised methodology there were 1.313 million Poles unemployed in March (the latest month for which we have such data) and the seasonally adjusted unemployment rate was 7.7%.



Polish retail sales continued to grow at a healthy clip in April, if rather more slowly than in March, a factor which may well have influenced the central bank policy decision. Retail sales rose 17.6 percent from a year earlier and 2.9 percent from March.



On the other hand Polish industrial output growth accelerated in April, although this whole situation is clouded somewhat by the timing of easter this year, and the fact that April thus had more working days than March. Production rose an annual 14.9 percent, compared from 1 percent in March. Month on month, production was up 4 percent over March.





The zloty has gained 5.6 percent against the euro and 12.7 percent vis a vis the dollar this year, driven by strong economic growth, the prospect of euro adoption and rising yield differentials as the central bank has steadily raised rates.

The Polish government now forecasts that growth will slow to 5.5 percent this year from the decade-high 6.5 percent in 2007.



Central bankers are concerned that slowing growth won't prevent higher wages and employment from speeding up inflation. Average corporate wages rose an annual 12.6 percent in April, while employment increased 5.6 percent from a year ago. It remains to be seen whether the current policy rate will be sufficient to continue to hold back inflation given the vigour of the current expansion and the steadily dwindling pool of appropriately trained and educated workers.

Poland Retail Sales April 2008

Polish retail sales grew more slowly than expected in April, a factor which may well influence the central bank policy decision later this morning. Retail sales rose 17.6 percent from a year earlier and 2.9 percent from March, the Warsaw-based Central Statistical Office said today.

Unemployment Poland April 2008

Poland's jobless rate declined to the lowest rate in almost a decade in April, falling for a third consecutive month as robust economic growth boosted hiring. Unemployment declined to 10.5 percent from 11.1 percent in March, according to the methodology used by the Central Statistical Office. About 1.61 million Poles were registered as unemployed at the end of April, the office said.

Using the EU harmonised methodology there were 1.313 million Poles unemployed in March (the latest month for which we have such data) and the seasonally adjusted unemployment rate was 7.7%.

Poland Wages and Employment April 2008

Wages in Poland's corporate sector rose 12.6% on the year in April, above forecasts and up from 10.2% in March, according to data released Monday by the Central Statistical Office, or GUS. On the month, April average wages fell 0.2%, following March's 3.7% monthly rise. The figures are preliminary and cover Polish companies with more than nine employees.





GUS said the average gross wage was 3,137.74 zlotys ($1,443.90) in April, down from PLN3,144.41 in March. The wage figures, despite slightly lower-than-expected April annual inflation of 4.0%, may support policy hawks on Poland's rate-setting Monetary Policy Council or RPP, pushing for a 25 basis points rate hike at the end of May.

April's industrial production data, out yesterday, will also be important in discussions on the next policy move.

Total employment at firms with more than nine employees amounted to 5.39 million in April, up 5.6% on the year. This slightly lower than expected employment rise may provide central bank "doves" with an argument for leaving the key rate at 5.75%.

Central Bank policy maker Halina Wasilewska-Trenkner will almost certainly not be one of these however, and she was out this week arguing interest rates should be raised immediately to help bring the inflation rate back toward the central bank's target.

Wasilewska-Trenkner said the inflation rate, which was 4 percent in April, will be around 3.5 percent and 4 percent at the end of this year, and won't fall below the 3.5 percent upper limit of the bank's target until 2010. She doesn't expect the central bank's June inflation outlook to change its tone from the previous forecast in February, which assumed slower growth of fuel prices and wages.

``There is still room for an interest rate increase'' and ``the sooner it happens, the better.....One or two hikes would be enough as the policy tightening cycle is about to end.......There is no point in waiting for the projection release to change rates as there are still forces in the economy driving inflation........ Dynamic wage growth, which won't be matched for another month by labor productivity, may denote that we have to deal with second-round effects and must intensively work to set up a barrier against further price growth.''

Fellow policy maker Andrzej Slawinski basically seems to agree with her:

``The worsening business climate due to weaker growth prospects and stronger zloty'' does not rule out ``further monetary tightening because of still double-digit rate of growth in wages,'' Slawinski said.

Fellow rate setter Marian Noga told TVN CNBC yesterday that he will vote in favor of a rate increase this month, while council member Andrzej Wojtyna said one boost can be made ``in the immediate future,'' the daily Rzeczpospolita reported yesterday.

The inflation rate, which has been hovering close to a four- year high, unexpectedly slipped to 4 percent in April from 4.1 percent in March as the advance of the zloty against the euro helped to curb import prices and growth in food prices slowed. The rate is still above the central bank's 2.5 percent target. The zloty has gained 5.7 percent against the euro this year and reached a more-than 6 1/2 year high of 3.3785 on May 14


The central bank has raised the key rate seven times in the past year to 5.75 percent in an attempt to damp inflation as a buoyant labor market, with salaries growing an average 10 percent, and record-high employment drive demand for consumer goods, but at some point the central bankers will begin to worry that raising interest rates and boosting the zloty may begin to undermine the competitiveness of Polish exports, and basically at that point the only real arm the Polish administration will have left is running a fiscal surplus to drain demand via that route out of what seems to be slowly becoming an "overheated" economy.

Poland Industrial Output April 2008

Polish industrial output growth accelerated in April, which had more working days than the March, raising the prospect that the central bank may well raise interest rates to counter a pickup in growth. Production rose an annual 14.9 percent, compared from 1 percent in March, the Central Statistical Office said today. Month on month, production was up 4 percent over March.



Basically it is important to remember that Easter was in March this year, and this is playing havoc with non-working day adjusted data. But still y-o-y growth looks pretty robust at this point.

Poland Inflation April 2008

Poland's inflation rate unexpectedly fell in April, raising the chances the central bank will hold interest rates steady in the coming months. The rate slipped to 4 percent from 4.1 percent in March, according to data from the Central Statistical Office in Warsaw. Consumer prices gained 0.4 percent in the month.



The April result was driven mainly by food price growth of 6.8 percent annually, regulated energy price gains of 7.2 percent and a fuel cost increase of 6 percent.


Slowing inflation adds another argument to keep interest rates unchanged after the Monetary Policy Council paused the tightening cycle last month following seven increases in the benchmark seven-day reference rate, as wages, industrial production and retail sales rose at a slower pace. The key rate now stands at 5.75 percent.

The 10-member Monetary Policy Council have lifted borrowing costs seven times in the past year to counter the effect of rising wages and strong consumption.