Inflation exceeds expectations, prompts post-pandemic recovery concerns

Poland's consumer prices likely rose by 5.8 percent year on year in September, faster than expected by the market and becoming a growing constraint for the post-pandemic economic recovery, latest macro data show.

Poland's consumer price index (CPI) growth, according to a flash estimate by the Central Statistical Office (GUS), beats market forecasts for a 5.6-percent annual rise, with economists now expecting even more spectacular increases in the months to come.

For example, analysts at ING BSK believe that Poland's CPI could approach 7 percent year on year at end-2021, noting that no major respite should be expected in 2022 in that area.

The September surprise is attributable in part to a 28.6-percent year on year spike in the prices of fuel used for personal transport and a 7.2-percent annual jump in prices of energy, while food prices went up 4.4 percent against a year earlier.

The mounting prices are appearing to choke Poland's economic revival, as indicated by a third consecutive decline of the country's Purchasing Managers' Index (PMI) measuring prevailing trends in the manufacturing and service sectors.

In September, that index slid to 53.4 pts from 56.0 pts in August, descending further from a 59.7-pt peak recorded in June and hitting the lowest level since February, a Friday report by IHS Markit showed.

That latest decline came amid "cumulative inflationary pressures... having a negative impact on sales, both at home and abroad," IHS Markit noted.

The combination of accelerating inflation and a slowdown in manufacturing activity already has experts worrying, with Credit Agricole economists flagging it as "stagflation," a word evocative of historical economic crises.

But no need to sound the alarm yet as what we are seeing seems like a "temporary phenomenon," although with possible downside on Poland's economic growth in Q3 and Q4, they say in their comment.