Polish consumers more pessimistic (Daily analysis 19.08.2020)

For the first time since April, the confidence of consumers in Poland has deteriorated. The data on wages and employment, in turn, surprise positively. The zloty is losing some of yesterday's profits. The dollar is still close to the key level.

Consumer behaviour in the coming months will be important

Wednesday morning brought some mixed macroeconomic data from the Polish economy. According to the Polish Central Statistical Office (GUS), employment in the enterprise sector rose by 1.1% on a monthly basis in August (drop by 2.3% year-on-year), and the average wage increased by 1.8%. (up by 3.8% year-on-year). In all cases, the readings turned out to be above the median of market expectations, which confirms the trend of a slightly faster activity growth than expected in Poland.

In turn, the more "soft" data, i.e. the consumer confidence in August, turned out to be slightly less favourable. The decline in the consumer confidence index fell slightly compared to July, from -13.4 pts. to -15.2 pts., but a marked improvement to -6.5 pts. was expected. August was also the first month since April when the index fell compared to the previous month.

Interestingly, the assessment of the current financial situation and the possibility of making important purchases have improved, and a smaller percentage of consumers fear losing their jobs, but the pandemic's outlook has worsened. In August, 36.1% of consumers considered the current epidemiological situation to be a "big threat" to the population of Poland as a whole, while in July it was still 27.9%. In the context of personal health, this judgement of the coronavirus situation also increased from 21.8% to 26.9%.

This is probably also the result of the increase in the number of cases in various parts of Europe, also reported by the media, which has a negative impact on the general consumer sentiment. Its trend in the coming months will be important, as it will be consumer demand that will determine to the greatest extent how the economy will return to pre-pandemic levels.

The zloty depreciates slightly, but it still remains strong

Today's publications turned out to be relatively neutral for the zloty. With small changes in the dollar's value on the global market, the zloty rebounded yesterday's appreciation around midday. The USD/PLN exchange rate rose from 3.66 in the morning to approx. 3.69 and the EUR/PLN to approx. 4.40, although still in the morning and yesterday the rate was around 4.37.

These levels still represent a relatively strong zloty in the context of recent weeks, and only greater movements on the dollar could likely modify something in the zloty's outlook. An increase in volatility can be expected tonight when the record of the last Federal Open Market Committee meeting will be published. However, significant changes in the dollar should not take place (i.e. indirectly for the zloty), although it should be remembered that with the current weakness of the dollar (close to the key level of 1.20 per EUR/USD), the so-called "minutes" may be a stimulus to weaken the dollar, at least around the time of publication.