Inflation in Poland increased again. Central Statistical Office provided data for July 2024

In July 2024 prices of consumer goods and services in Poland increased by 4.2% compared to the same period in the erstwhile year – the Central Statistical Office (GUS) informs. This reading is in line with the fast respect that the CSO had given earlier, pointing to the dynamic increase in inflation, which is the consequence of the partial defrosting of electricity and gas prices. This phenomenon has had a direct impact on the increase in inflation, causing many concerns about further price stableness in the country.

Jumping price increase in July

According to CSO data, prices increased by 1.4% compared to June 2024. This increase reflects the abolition of fresh elements of the alleged anti-inflationary shield by the government, which occurred on 1 July 2024. This decision contributed to the inflation leaving the scope of permissible deviations from the National Bank of Poland (NBP) target, which is 2.5% per year with a tolerance of 1.5% to 3.5%.

Economists have for a long time warned against specified a scenario, but the scale of price increases, especially in the energy sector, has exceeded the expectations of many experts.

Price developments in individual categories

The CSO provided detailed data on price increases in different categories. Goods prices in July 2024 increased by 3.5% compared to the same period of the erstwhile year, while service prices increased by 6.2%. Compared to June 2024, goods increased by 1.6% and services by 1.1%.

The highest impact on the overall inflation rate was the higher prices in terms of housing (7.4% increase), food (3.1%) and restaurants and hotels (7.6% increase). According to the CSO, "in comparison to the corresponding period of the erstwhile year, higher prices for housing, food and restaurants and hotels increased inflation by 1.86 p.m., 0.77 p.m. and 0.43 p.m." On the another hand, lower prices of clothing and footwear (a fall of 1.0%) decreased the inflation rate by 0.04 p.m.

Compared to June 2024, the biggest impact on price increases was the higher costs in terms of housing (growth by 5.7%), recreation and culture (growth by 2.1%), and restaurants and hotels (growth by 0.6%). These categories increased the rate by 1.42 p.m., 0.13 p.m. and 0.04 p.m. respectively. At the same time, lower food (0.5%) and clothing and footwear prices (3.1%) decreased by 0.14 p.m. and 0.12 p.m. respectively.

Energy as a major origin in inflation growth

In July 2024, peculiar attention was drawn to the dynamic increase in energy media prices, which increased by 10.1% year-on-year and by 11.8% compared to June 2024. Electricity recorded an increase in prices by 18.5% year to year and 19.9% period to month. Gas prices besides increased importantly – by 16.1% year-on-year and by 16.8% month-to-month.

Economists of the Polish economical Institute noted that "the increase in inflation from 2.6% to 4.2% was due to the partial defrosting of electricity and gas prices, which increased by 10% on average, by 1.4 pp. Services prices are besides rising rapidly – 6.2%".

Similar observations were presented by the ING Bank Śląski Economist team, who noted in his comment on inflation that "July inflation was confirmed at 4.2% year-on-year, and growth compared to June is mainly due to higher energy costs. Base inflation most likely increased to around 3.7-3.8% year-on-year with 3.6% of the period before".

Future projections

The macroeconomic analysis squad of ING Bank Śląski forecasts that inflation in Poland will stay above 4% in terms of year to year until the end of 2024. Economists besides indicate that the interest rates of the National Bank of Poland will stay unchanged in 2024.

The increase in energy prices, combined with global inflation trends, poses challenges to Poland in maintaining price stableness and protecting consumer purchasing power. It will be crucial in the coming months to monitor further government and NBP policies that may affect inflation dynamics in the country.

Conclusion

July 2024 brought crucial increases in prices of goods and services in Poland, which affected the overall increase in inflation to 4.2% year-on-year. The main drivers of this increase were higher energy and services prices. Faced with economical uncertainty, maintaining price stableness in the coming months will be 1 of the most crucial challenges for the Polish economy.