On September 30th, we learned the results of the first quick, experimental inflation assessment, conducted by ZUS in September. They indicate a year to year decrease of 0.8 percent in consumer prices, and by 0.2 percent compared to August. – This is a big surprise. Though nobody expected a sizeable price growth, the continued deepening of inflation was a scenario nobody seriously considered either. It appears that the fuel price decrease and imported foods compensated with a surplus for the consequences of drought which has recently hit domestic agricultural production. However, one should keep in mind that these figures are tentative and their accuracy is not known yet – comments Łukasz Kozłowski, expert of Employers of Poland.
Although the first half of this year saw the first signs of deflation petering out, recent months have changed the picture completely. As a consequence of base effects, slower year to year price decrease seemed to be a given – in an analogous period of 2014, we were already dealing with intensified de-inflation processes. What is more, this year’s drought had a negative impact on the supply of domestically produced food - which can be expected to contribute to higher prices as well.
However, as it transpires, the impact of external factors is much bigger the initially suspected. Prices of raw materials, including energy sources, continue to drop – which is a result of both an increase in supply, and a weak demand exhibited by developing economies (who are experiencing a serious downturn or even recession – as is the case in Brasil). Global inflation remains very low, and global food price indices skydived, falling to the lowest level in at least seven years.
This puts the realization of the government’s inflation prognoses in question – prognoses which served as a basis for next year’s budget. It is not too late yet for an appropriate correction which would reduce the risk of failure to meet the income, spending and deficit targets.
Łukasz Kozłowski, economic expert of Employers of Poland