Preliminary inflation estimate for September 2022 - market commentary

According to a flash estimate, inflation in September this year. was 17,2%. This is another record level in this cycle, while the market expected a reading of only 16,5%.

This is not good news for the Monetary Policy Council, as it means growing pressure for further interest rate hikes (the next meeting is already on Wednesday). We estimate the core inflation at 10,8% year on year (it is also another “hill” in this cycle).

W. 1 Annual change in the consumer price index (inflation) and core inflation in Poland:

Source: own study, GUS

Inflation pressure

Month-on-month inflation rose by 1,6% (the strongest since May this year), so on a monthly basis, there is no weakening of inflationary pressure yet. And it is in the monthly changes (especially core inflation) that we should see the first signs of inflation slowdown. And that is still ahead of us.

W. 2 Monthly change in the consumer price index (inflation) and 6-month moving average (monthly changes) in Poland:

Source: own study, GUS

We estimate the rise in core inflation at around + 1,5% in August this year. (this is the strongest monthly increase in this cycle, the exact calculations will be published by the NBP in mid-October this year). It can be said that core inflation is unfortunately accelerating.

W. 3 Monthly changes in core inflation (only food and energy prices) and 6-month moving average (monthly changes):

Source: own study, NBP.

More and more expensive on store shelves

The prices of "food and non-alcoholic beverages" rose by 1,7% in September, following the seasonal pattern where prices rebound sharply this month (after food declines in the holiday months). However, in 2022 there were no drops in holiday food prices. The long-term average monthly change of this series in September is + 0,51%.

W. 4 Monthly series change "Food and non-alcoholic drinks"In 2022 against the average path for 2000-2021 (seasonal pattern):

Source: own study, GUS

"Energy carriers" (ie electricity, gas, fuel (coal), heat energy) quickly increased in September this year. by 3,7% compared to August this year, and the annual change is as much as 44,2%.

W. 5 Annual price change "Energy carriers"Against the background of the annual change in the entire basket of inflation:

Source: own study, GUS

"Fuels for private means of transport" (mainly diesel oil and gasoline) fell rapidly in September this year. by 2,1% and the year-on-year change was 18,3%. This is the third consecutive month of price drops in this category.

W. 6 Annual price change "Fuels for private means of transport"Against the background of the annual change in the entire basket of inflation:

Source: own study, GUS

Increase in core inflation

Inflation in September this year. has once again risen to the highest level in this cycle. This is an additional pressure on another interest rate hike by the Monetary Policy Council at the next meeting in October this year. Some MPC members expressed their opinion about a possible peak in inflation in summer, which could mean the end of the hike cycle, but another increase in inflation increases the chances of a further 0,25 percentage point hike already on October 5 this year.

On the other hand, the rise in core inflation, which is one of the most "sticky" measures of inflation, looks alarming. This means that it will be more and more difficult to bring inflation down and that further interest rate hikes will be necessary. But the next hikes (apart from the one in October this year) will probably be explained only after the inflation data for the next month.

Source: Jarosław Jamka, Chief Investment Officer, WealthSeed