Rising output without inflation

The statistics office said last Wednesday industrial output rose 5.5 percent year-on-year in September after a revised 4.8 percent increase in August. Economists were expecting a 5.1 percent annual rise in output.

Central bank policy council member Dariusz Filar said that the data indicates the economy picked up speed in the third quarter of the year.

"The rise in industrial production in September confirms that economic growth in the third quarter was above 3 percent," he said.

The złoty inched up after the data, but quickly stabilized to trade at 3.9075 to the euro and 3.2656 to the dollar. Bond yields fell two basis points across the curve. Last week, the Polish currency traded just 1.4 percent off a 40-month high to the euro hit earlier this month, supported by improving growth outlook and hopes that the new center-right will revive fiscal reforms.

Prices at factory gates held flat month-on-month in September and were 0.2 percent down year-on-year, with the strong złoty easing the impact of high global oil prices.

Consumer price inflation also remains benign with the September annual rate of 1.8 percent below the central bank's 2.5 percent target. It is expected to ease in the final quarter of the year.

"From one side fairly strong output signals the strong złoty is not leading to a weakening of growth, from the other side there is no inflation pressure at all in the economy," said Arkadiusz Krześniak, chief economist at Deutsche Bank in Warsaw. He added this data signals that there is space for a cut in rates, but expects the central bank to wait until a clearer political situation in Poland. The central bank left its main rate unchanged at its all-time low of 4.5 percent last month and is expected to hold them firm again this month after recent warnings of risks poised by costly oil and more positive growth prospects. Several economists, however, still expect another modest easing of rates before the end of the year. (Reuters)