Polish December Retail Sales Falls the Most Since 2005Jeffrey Donovan
Polish December retail sales declined the most since 2005, boosting pressure on the central bank to continue cutting borrowing costs to spur the economy.
Sales fell 2.5 percent from a year earlier, compared with a 2.4 percent gain in November, the Central Statistical Office in Warsaw said today. That was the steepest drop since April 2005 and compared with a median forecast for a 1.2 percent increase in a Bloomberg survey of 22 economists. Retail sales rose 15.1 percent from the previous month.
The Narodowy Bank Polski has reduced the main rate by a combined 75 basis points to 4 percent since November, after the economy slowed to its weakest pace in almost three years in the third quarter. While Governor Marek Belka has said the bank may “pause” the easing cycle, rate-setter Andrzej Bratkowski said in a Jan. 21 interview that rates should be cut to 3 percent to avoid economic stagnation.
“Real incomes are falling and households are starting to save again after many quarters of decline,” Rafal Benecki, chief economist at ING Bank Slaski in Warsaw, said by phone today. “A February rate cut is probable after these data and we don’t rule out a fifth straight reduction in March.”
In a separate report today, Poland’s unemployment rate rose to 13.4 last month from 12.9 percent in November, the statistics office said. That compared with a median forecast of 13.3% in a Bloomberg survey of 22 economists.
The zloty, which has weakened almost 2.5 percent to the euro since the start of the year, fell to 4.1940 per euro at 10:35 a.m. in Warsaw, extending its loss to 0.6 percent on the day. The yield on the government’s 10-year bond was at 3.801 percent, down from 3.837 percent yesterday.
Polish industrial production plunged the most in almost four years in December, declining 10.6 percent from a year earlier. The European Union’s largest eastern economy will expand 1.5 percent this year, the least since 2002, according to Bratkowski.
Poland’s central bank, seeking to tame inflation exceeding its 2.5 percent target, was the only one in the 27-nation EU to raise rates last year. Price growth slowed to 2.4 percent last month, down from 4.3 percent in June and below the target for the first time in 27 months.
The central bank holds its next rate meeting on Feb. 5-6.