Poland Retail Sales January 2008

Polish retail sales rose an annual 20.9 percent in January, the highest in almost four years, raising expectations that central bank policy makers will raise borrowing costs when they meet later this week.

Sales growth, compared with the same month a year earlier, was the fastest since April 2004, the Central Statistical Office reported today, while compared with the year on year growth rate of 12.4% in December the rate of increase was up sharply.



Today's report may tip the balance for the central bank's rate-setting council, which meets to discuss interest rates on Feb. 27. Higher-than-expected industrial output last week increased speculation that the bank will raise the 5.25 percent benchmark interest rate for the sixth time in 10 months. The zloty traded at 3.563 per euro at 10:55 a.m. in Warsaw, little changed from earlier in the morning and Friday's close. The yield on the government's bond maturing in April 2012 rose 3 basis points to 6.138 percent from Friday.

Cars sales soared an annual 42 percent in January, leading retail sales of all products and followed by an almost 30 percent gain in sales of textiles and footwear. January sales of food rose 12.5 percent on the year after falling 0.3 percent in December.

The central bank-led Monetary Policy Council starts its two- day meeting tomorrow. The council lifted the key interest rate to 5.25 percent last month. The rate was record-low 4 percent in April last year when the council started to its series of rate increases.

Polish Central Bank Raises Rates

Poland's central bank raised its benchmark interest rate by quarter point to 5.25 percent yesterday, its fifth increase since April, to combat rising inflation, while the Federal Reserve has cut U.S. borrowing costs by 1.25 percentage points this month to prevent a recession in the world's largest economy. The European Central Bank has kept its main refinancing rate at 4 percent since June.



Poland's central bank is likely to continue to raise rates in the coming months given the need to cap wage-related inflationary pressures.



The Polish zloty rose the most in a week against the euro after the central bank decision. Poland's currency climbed to its highest level since Jan. 24 after policy makers lifted the seven-day reference rate to 5.25 percent. The zloty was also buoyed as a report showed the $339 billion eastern European economy expanded by its fastest pace in a decade last year, supporting the case for more rate increases.


Inflation will remain above its target of 2.5 percent plus or minus 1 percentage point, boosted by food and oil costs, the central bank forecast. Policy makers next decide on interest rates on Feb. 27.

Poland GDP 2007

Poland's economic growth accelerated at the fastest pace in a decade last year as rising employment and wages boosted profits and consumer spending. Gross domestic product expanded 6.5 percent last year, the central statistical office reported,The economy grew 6.2 percent in 2006.



Poland, which is the biggest European Union member in eastern Europe, is counting on accelerating economic growth to help living standards rise to western European levels. However there are conncerns that many years of below replacement fertility, heavy out migration of productive age workers and a rapidly ageing population may have placed a cap on the rate at which the economy can grow without seriously overheating, and despite rather high continuing levels of unemployment there are serious concerns about labour shortages.

The unemployment rate dropped to 11.4 percent in December from a record 20.7 percent in February 2003. Authorities now must grapple with allowing the expansion and keep inflation at bay. Investment rose 20.4 percent in 2007, while domestic demand gained 7.3 percent. Construction rose 15.6 percent and production increased 7.7 percent, the statistical office said in its preliminary estimate today.

At the same time, the proportion of Poles in legal employment increased by a record annual 5 percent in November, putting more money in people's pockets and boosting demand for housing. Construction ``remained one of the flywheels'' of Poland's economy, statistical office head Jozef Olenski said at a press conference today in Warsaw. We had better just hope that the wheel in question doesn't simply fly off its axis.

The Zloty and Polish Inflation 2007

The Polish zloty continues to rise against the euro on speculation the Polish central bank will keep raising interest rates to stem accelerating inflation. Poland's zloty rose against the euro again today after central bank monetary policy council member Jan Czekaj said it's ``more likely'' interest rates will be raised further to curb an expected acceleration in inflation. Czekaj's comments, made in an interview broadcast by TVN CNBC Biznes today, came after the finance ministry said inflation probably accelerated in December to 4 percent. Against the euro, the zloty rose to 3.6048 by 5:02 p.m. in Warsaw, from 3.6153 late yesterday. Poland's currency gained 6.1 percent versus its European counterpart last year, its biggest advance since 2005, as policy makers lifted borrowing costs during the year by 2 percentage points to 5 percent.




The Polish central bank kept its key rate unchanged at its last meeting on Dec. 19 after lifting the benchmark seven-day reference rate by a quarter of a percentage point four times earlier in the year.




The cost of manufactured goods in Poland's $339 billion economy rose an annual 2.6 percent in November, compared with 2 percent the month before, a government report showed last week, while net core inflation accelerated to 1.5 percent from 1.4 percent.

Polish central bank monetary policy council member Dariusz Filar said recently that he expects inflation to accelerate in 2008, and that it won't come close to the bank's mid-range target of 2.5 percent until in the first half of 2009, fueling speculation that policy makers will raise interest rates as early as next month.

"I fear that we have a period of rising inflation before us" he said in an interview with the Gazeta Prawna daily. The inflation rate may "find itself in the region of 4 percent" in the first quarter of next year, he said.

The inflation rate rose to 3.6 percent in November, above the bank's target range of 1.5 percent to 3.5 percent.




According to Filar, the economy may expand at ``around 5 to 6 percent'' in 2008, slowing from a projected 6.5 percent this year. Turbulence on the world markets will have little effect on Polish economic growth as it is ``mainly driven by internal demand,'' he said. We will see, although one thing is for sure, internal demand in Poland, and in particular construction demand are the key.



Wages, a major driver of consumption, grew an annual 12 percent in November. Earnings have been bolstered by an economy that has grown at 6 percent or more for seven quarters, and unemployment at its lowest in nine years.

Merry Xmas and A Happy New Year

Well, a Merry Xmas and a Happy New Year to all my readers. Thank you for taking the time and trouble to pass-by. This blog will now - failing major and surprising new developments in the global economy - be offline till the end of the first week in January, or till after the festival of Los Reyes Magos in Spain (for those of you who know what this is all about). Come to think of it, maybe this is just what our ever hopeful central bankers are in need of even as I write - some surprise presents from the three wise men - but I fear that this year if these worthy gentlemen do somehow show at the next G7 meet, the star in the east which draws them will not be the one described in the traditional texts, but in all likelihood the rising star of India.



Credit crunch, did someone use the expression credit crunch?