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Inflation keeps high


Consumer inflation quickened again in April, having slowed substantially during the preceding month. The main contributor to the rise in the CPI index, which came despite a higher base of comparison, were very high prices of fuels and energy and a depreciation of the zloty compared with its year-ago level.

Although pre-Easter spending undoubtedly influenced the April inflation rate, the strong upward climb of consumer prices observed over the past few months has been driven primarily by supply-side factors. This can be seen e.g. from the fact that core inflation, i.e. excluding food and energy prices, has remained significantly lower this year, oscillating between 2.4-2.7% y-o-y, i.e. around the mid-point of the central bank’s target band of 2.5% y-o-y +/- 1 p.p.

Whilst inflation can be expected to decelerate temporarily in May due to a very high comparative base, we see the CPI remaining above the upper end of the NBP’s target range in the months ahead, held up by continued weakness of the zloty and by high global oil prices (in June and July consumer inflation will be further stimulated by the Euro 2012 tournament co-hosted by Poland). Though it is hard, at this point, to predict with precision the course of events in the eurozone or the extent of the slowdown in Poland and its impact on consumption and prices in the remainder of the year, we expect a more noticeable decrease in consumer inflation to occur only in the fourth quarter. We forecast that in 2012 as a whole the average annualised CPI will amount to 3.9%.

Paweł Sionko
Construction Market Analyst, PMR

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