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August economic commentary

August economic commentary

Dodano: 2022-08-23

We observe an increasing unpredictability of economic processes in the world. However, a strong labor market still allows us to expect that the forthcoming economic downturn in the world will be rather mild in Poland.

Uncertainty in global economic processes

This is noticeable in the currently – observed mechanisms:

  • supply-side sources of price increases making it difficult to effectively combat rising inflation
  • the increase in geopolitical tensions considered the highest in this century;
  • departure of central banks (including the ECB or the Bank of England) from the forward guidance strategy (signaling how they intend to shape monetary policy) in favor of changes in monetary policy parameters taken ona meeting to meeting basis,  based on current data – institutions are changing their stance.

A light in the tunnel?

However, central banks intend to fight inflation, as the long-term consequences of inflation breaking away from inflation targets could do more harm than the expected slowdown in economic activity. Cited due to monetary tightening. Certain factors, however, make it possible to believe in a mild (although inevitable) economic slowdown and a moderate impact of the necessary reduction in demand on employment and unemployment rates.

These phenomena will be on a much smaller scale than during the pandemic or global crisis, e.g. thanks to:

  • still favorable situation on the labor market: in the US and in Europe, unemployment rates remain at very low (in the euro area, record low) levels;
  • continuous increase in employment and a record number of unfilled vacancies (despite recent declines).

Situation in Poland

What gives us a relatively good starting position in the fight against the effects of unfavorable economic phenomena include:

  • low unemployment rate: the second lowest in the EU, at 2.7% in June 2022 (with the EU average equal to 6%);
  • creating new jobs, which made it possible, for example, to employ approx. 370 thousand refugees from Ukraine in a relatively short time;
  • record low number of the unemployed per job offer (8.5 on average);
  • many unfilled vacancies;
  • large product differentiation of the Polish economy, allowing it to flexibly respond to disruptions in global demand;
  • inflationary pressure that began to gradually decline.

Greater pressure on price increases appeared in Poland at the beginning of last year, and accelerated after the Russian aggression against Ukraine. However, the subsequent months of the second quarter brought a return to the average long-term median deviations of monthly changes in the prices of the components of the PPI basket. Taking into account the HICP, the inflationary pressure in Poland appeared with a delay of about six months in relation to the PPI. However, in both cases there is a noticeable decrease in, among others, as a result of the introduction of the anti-inflationary shield. Until June, the median of monthly price deviation in the HICP basket components was rising faster than the long-run average, which may reflect core inflation in Poland. Important factors in further CPI readings will also be increases in the prices of energy carriers for households and the expiration of the anti-inflationary shield. They can boost CPI inflation after its last stabilization at 15.5 percent. in June and July this year

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