Poland’s current account deficit narrowed to € 1.027bn in July 2012 from € 1.240bn in June and versus the consensus expectation for a widening to € 1.361bn in the period, NBP data showed on Tuesday. The lower C/A deficit was primarily due to the lower trade deficit stemming from better-than-forecast exports.
Polish exports were up 12.7% y/y in July, significantly above 0.5% y/y growth in June and the consensus expectation of 4.6% y/y. Moreover, exports grew much faster than the 4.2% y/y rise in imports. The NBP informed that the highest increase in exports was recorded by investment goods (up 25.3% y/y in July), whereas exports of intermediate and consumer goods rose 5.0% y/y and 5.7% y/y respectively.
Polish export dynamics in July were helped by the favourable working-day effect (there was one extra working-day in July 2012 versus July 2011) and the reference base effect (exports were relatively low in July 2011), but the data still suggests the deteriorating global environment had less of a negative effect on Polish producers at the beginning of 3Q12 than had been expected. In the months ahead, however, we expect exports to slow down again, tracking lower external demand and taking an additional hit from the unfavourable base effect.
Although the strong Polish exports data for July are welcome, it is important to note that there is a one-month lag compared to other data from the real economy, hence these figures have only limited importance for the MPC. In our opinion, the industrial output and retail sales readings for August, along with the August inflation print, will be of key importance for the MPC’s upcoming decision in October.