On the radar
Poland’s real retail sales rose 3.2% year-on-year in August.
Today at 10am CET Poland will publish its unemployment rate.
In the afternoon, the Hungarian central bank will hold an interest rate setting meeting where a rate cut is expected.
Economic Development
Flash PMI indices for Germany and the euro area as a whole fell in August, coming in below expectations. Moreover, the composite PMI indices for Germany and the euro area as a whole fell below the threshold of 50, meaning that the economies are in the contraction zone. As for the euro area, the positive momentum from the Olympics seems to have disappeared. The sharp fall in the euro area composite PMI indices seems to have been mainly caused by a sharp decline in service sector sentiment in France. Also, the manufacturing sector remains in trouble. The euro area manufacturing PMI indices have already been in the recession zone for 27 months, and are at their lowest level in a year (40.3) in Germany. The continued decline in domestic and export orders does not suggest any improvement in the short term. Moreover, expectations for the future continue to fall. The underlying weakness of the German industrial sector is already evident in the region. Most recently, Poland released its industrial production growth for August, which was disappointing and reflects the weakness of the German economy.
Market Trends
In Hungary, the central bank suspended rate cuts in August, but after the ECB and FOMC meetings, it expects a further 25bp cut at today’s meeting to 6.5%. Headline inflation came in below expectations in August, but the inflation outlook remains largely unchanged. In addition, the Hungarian central bank is due to publish new inflation and growth forecasts. The Hungarian forint started the week slightly weaker against the euro, and a similar development could have been seen in the Czech FX market. In Poland, MPC member Kotecki maintains his view that the first time monetary easing will be discussed in Poland will be in March 2025, when the central bank will review its inflation and growth forecasts. Long-term interest rates have fallen earlier this week. Romania held a successful local government bond auction on Monday, selling more 2031 bonds than planned.
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