Weekly Market Analysis: 27.07.2010
Retail sales up again in June
Retail sales growth in nominal terms accelerated in June to 6.4% y-o-y from 4.3% y-o-y in May. The increase was higher than expected. In real terms, retail sales growth accelerated to 4.5% y-o-y from 2.0% y-o-y. June was a consecutive month with retail sales figures stronger than expected, which indicates that consumption is recovering after it slowed significantly at the beginning of the year. Private consumption is driven by an improvement on the labour market coupled with a rise in disposable incomes. In Q2 2010 retail sales grew by around 3% y-o-y in nominal terms and around 1% y-o-y in real terms. On the basis of retail sales and industrial production data, it can be estimated that the GDP growth rate was close to 3%.
Unemployment rate drops as expected in June
The registered unemployment (claimant count) rate dropped in June to 11.6% from 11.9% in May and was in keeping with the earlier estimates of the Ministry of Labour. The number of unemployed dropped by 62,000 to 1.84 million over the month. The decrease was much larger than in June 2009. The labour market is now supported by seasonal factors, with an increase in the number of jobs in agriculture, construction and services noted as usual at this time of the year, and by higher economic activity, especially in the manufacturing sector. In our view, unemployment may continue to decline in coming months but at the end of the year it will pick up to around 12%, a level similar to that recorded in December 2009.
Core inflation down in June as expected
Core inflation, excluding food and energy prices, was 1.5% y-o-y in June against 1.6% y-o-y in May. The reading was in line with expectations and stood at the lower end of the inflation target band. CPI inflation increased to 2.3% y-o-y in June from 2.2% in May, reflecting an unusual increase in food prices at this time of the year.
Satisfactory results of stress tests on European banks
Seven banks have failed stress tests designed to assess European Union banks’ ability to survive future economic shocks. A total of 91 large banks from across Europe were tested. PKO BP, the only Polish bank to be evaluated, passed the test.
Zloty recovers
At the beginning of the week the zloty weakened sharply on news that negotiations between Hungary and the IMF on another loan package had stalled. The EUR/PLN rate rose to 4.1540 on Monday. But the zloty bounced back on Tuesday on lower risk aversion and very strong data for the Polish economy. As a result, the zloty more than made up for the losses it sustained at the beginning of the week, strengthening to 4.0340.
