According to preliminary data published by the Central Statistical Office (GUS), inflation in May was 2.5% year-over-year. This is an increase of only 0.1 percentage points compared to April, which is lower than analysts had predicted. However, inflation is currently on an upward trajectory and could reach around 5-6% year-over-year by the end of the year.
The rise in inflation in May is primarily due to increasing food prices. This is the second round of increases resulting from the VAT hike on food from April 1. In May, food prices rose by 0.3%. The cumulative increase in food prices in April and May amounted to 2.4%. In April, the increase was 2.1%, and in May, it was 0.3%. This indicates that the VAT hike has been reflected in prices to about half the extent – VAT increased by 5%, while prices rose by 2.4%.
However, it’s important to remember that food prices are also rising on the global market. The eToro Breakfast Index, which includes prices of basic breakfast food items, has increased by 36% since the beginning of the year. The biggest increases were seen in global prices of cocoa, coffee, orange juice, and pork, while products like wheat, tea, and milk became cheaper.
In Poland, fuel prices fell by 0.3%, with a 3.5% drop in oil prices on global markets, despite increased geopolitical tensions (primarily related to the situation in the Middle East) and recent price increases at the end of the month.
Energy carrier prices also fell, specifically by 0.2%. However, price increases are on the horizon – from July 1, electricity prices for households will rise due to the first stage of price thawing. This will be the most significant factor affecting inflation in the second half of the year. We predict that by the end of the year, in the most likely scenario, inflation will be in the range of 5-6% year-over-year.
Inflation remains the top concern for Polish investors. The latest eToro Individual Investor Pulse survey found that nearly 31% of Polish individual investors considered inflation the greatest potential external risk to their investment portfolio over the next three months.
Paweł Majtkowski, Analyst at eToro in Poland
