Poland’s inflation likely remained negative in August, deflation expected to end in December

Poland’s flash CPI is expected to have remained negative on year-on-year basis in August. According to a Societe Generale’s research note, flash CPI is likely to have come in at -0.8 percent year-on-year in August, a slight acceleration from -0.9 percent year-on-year in July. On a sequential basis, CPI inflation is expected to have declined 0.2 percent in August.

The monthly decline is mostly because of an impact of a seasonal drop in food prices, which is expected to have declined 0.6 percent, and also a fall in transport prices. Transport prices are expected to have fallen 0.7 percent month-on-month due to 1.5 percent decline in fuel prices. Within other components, prices of clothing and footwear are expected to have declined 2 percent month-on-month.

“We forecast softer deflation in September and the end of deflation in December 2016”, added Societe Generale.

Meanwhile, Poland’s current account deficit is expected to have widened to about EUR 332 million in July from June’s deficit of EUR 203 million, stated Societe Generale. On a trade account, surplus is likely to have come in at EUR 103 million. Imports and exports are expected to have dropped in the month because of a 10.8 percent sequential decline in manufacturing in July.

Export orders growth slowed in July to 6.7 percent year-on-year from June’s 31.3 percent. Moreover, the country received EUR 453 million in current transfers from the EU in July. Hence, primary income deficit might come around EUR 1,394 million.

“There is also likely to be a surplus on the services account of around €933m and on the secondary income account of €26m, in our view”, noted Societe Generale.