Poland’s December Inflation Dips, But Core Pressures Remain
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Poland’s consumer price inflation eased slightly in December, coming in below market expectations, but economists caution that underlying price pressures persist. According to a quick estimate from the Central Statistical Office (CSO), the CPI rose by 2.4% year-over-year, a decrease from the 2.5% recorded in November.
The market consensus, as indicated by a PAP survey, had predicted inflation would hold steady at 2.5%. On a monthly basis, prices remained unchanged, with the CSO estimating a 0.0% month-to-month inflation rate – aligning with expectations after a 0.1% increase in November. However, this overall moderation masks a more complex picture within the Polish economy.
Food and Fuel Drive Disinflation
The decline in inflation was largely attributed to falling prices in the food and fuel sectors. One analyst noted, “Inflation falls to 2.4% in December due to food and fuel prices.” Fuel prices for private transport were a significant disinflationary force, dropping 3.1% compared to the previous year and falling 0.9% on a monthly basis. Simultaneously, price increases for food and non-alcoholic beverages slowed to 2.4% year-over-year, down from 2.7% in November.
Energy Costs Tick Up, Labor Shortages Loom
While food and fuel provided relief, price pressure in the energy sector increased slightly. Energy carrier prices rose 2.8% year-over-year, up from 2.7% the prior month. A separate concern highlighted in the data is a growing labor shortage, with reports indicating “thousands of workers” are needed in key industries, a problem predicted to worsen.
Core Inflation: A Cause for Caution
Despite the headline figure falling below the National Bank of Poland’s (NBP) target, economists are focusing on a subtle but important trend: a slight increase in core inflation. Bank Pekao economists assessed that core inflation has “stabilized at approximately 2.7-2.8 percent,” while PKO BP estimates it reached 2.8% in December, up from 2.7% in November.
This uptick in core inflation – which excludes volatile items like food and fuel – is fueling caution about the sustainability of the disinflationary trend. “The structure presented by the Central Statistical Office suggests a slight increase in core inflation,” according to mBank analysts.
Sticky Service Inflation Persists
The data also reveals a widening gap between goods and services inflation. In November, goods prices increased by an average of 1.4% year-over-year, while service prices surged by 5.3%. This disparity is indicative of “sticky service inflation,” a phenomenon where service prices respond more slowly to economic slowdowns.
Labor costs are a key driver of this trend, as service companies pass on increased expenses to consumers. As one economist explained, continued wage pressure is leading to higher prices in sectors like health, education, and personal services.
The full December data from the CSO will be released on January 15, providing a more detailed picture of the inflationary landscape. While the December reading confirmed inflation had fallen below the NBP target, it also underscored that price pressures in parts of the economy remain elevated.
