No sign of inflationary pressure reducing soon, say analysts

The Office for Investment and Economic Cycles (BIEC), an economic think-tank monitoring the Polish economy, has said that there no signs of inflationary pressure being limited in the near term.

Its prediction comes after the Future Inflation Index (WPI) rose in September by 0.2 percentage points in comparison to its August value.

July's inflation rate in Poland stood at 5 percent year on year, according to the Central Statistical Office, its highest level in close to 20 years.

"Since the beginning of the year, in every monthly study, almost 90 percent of polled households believe that in the coming months prices will rise, of which one third assert that they will rise faster than to date," said BIEC in a report, adding that the tendency to save remains at a low level and the intention to buy long-lasting goods is at its highest level since the research began.

BIEC explained that negative interest on savings had resulted in people taking money out of banks, while a desire to retain the value of money had accelerated purchasing decisions through the principle of "buy before inflation."

The organisation also reported that demand for industrial goods had returned to pre-pandemic levels.

It added that for over a year, inflationary expectations among industrial sector management have been growing, and are now at their highest level since 2004 and that 20 percent more companies intend to increase prices in the near term than plan to cut them.

"We observe a growing tendency to raise prices in all sectors without regard to the size of enterprise," BIEC wrote, adding that the Producer Price Index (PPI) reached 8.4 percent in August.

BIEC said the price growth was partly due to supply-side factors, including the situation on the raw-materials markets. and that following a collapse in prices and production limitations, prices have started to grow sharply.

Demand factors, mainly internal, were also a factor, BIEC said. "Wage growth pressure observed recently results both from underpayment of labour groups whose wages are regulated by the state rather than by the market (mainly the so-called budget sphere) and growing staff shortages in other areas of the economy," BIEC wrote, explaining that one in two employers had trouble employing specialists, as a result of which, "the price-wage race is gaining momentum, which stimulates price increases."