Experts Predict December Inflation to Reach 5% Year-on-Year

ECONOMYExperts Predict December Inflation to Reach 5% Year-on-Year

Economists are divided on the key factors driving inflation in December, but many anticipate an increase to approximately 5% year-on-year. This rise is attributed to higher food prices, the uncertain situation in the Middle East affecting fuel costs, and the usual uptick in consumption during the holiday season. Market analysts also suggest that inflation could become more pronounced next year.

November Data Sets the Stage

According to Poland’s Central Statistical Office (GUS), the annual inflation rate in November was 4.7%, down from 5% in October. This result aligned with expert expectations and was received without major market concerns. However, the question remains whether December will see inflation rise, fall, or stabilize at November’s level.

“The decline in November was mainly due to a base effect from 2023 when prices were exceptionally high. A significant increase in inflation by year-end is unlikely, as rising oil prices seem improbable. However, core inflation—excluding food and energy costs—will remain elevated at around 4.2%,” noted Professor Paweł Wojciechowski, Chair of the Public Finance Institute and former Minister of Finance.

Mixed Projections for December

Market analysts like Piotr Kuczyński from DI Xelion are not anticipating dramatic changes. “The dollar often weakens against the zloty in December, which cushions the impact of rising oil prices. Assuming this trend continues, inflation should stabilize at around 4.9%. Early next year, we may see a slight uptick, even nearing 5% temporarily,” he explained.

Holiday retail sales also contribute to inflationary pressure. Professor Witold Modzelewski, a former Deputy Minister of Finance, highlighted, “The holiday season sees increased demand, often shifting towards higher-priced goods. As a result, December inflation is likely to hover near 5%, exceeding the inflation target of 3.5%.”

Key Factors in December’s Inflation

The ongoing debate about the primary drivers of December inflation highlights both domestic and global variables. Experts largely agree on the forecasted rate and the factors contributing to it:

  • Rising Consumption and Wages: “Higher wages, often paid in December, will further boost consumption and contribute to price increases,” said Professor Marian Noga from WSB Merito University and a former member of the Monetary Policy Council.
  • Energy and Food Prices: Energy and food prices, along with elevated core inflation, remain the primary contributors. Alior Bank’s Chief Economist, Agata Filipowicz-Rybicka, expects December inflation to reach 5%, with energy and food prices playing significant roles.

Challenges for 2025

Despite a slowing inflation trend, challenges persist. Professor Elżbieta Mączyńska, honorary president of the Polish Economic Society, warned, “Although inflation is slowing, prices continue to rise, albeit at a reduced pace. This remains a challenge for workers and those on fixed incomes. Budgeted salary increases for 2025 are unlikely to outpace inflation, limiting real income growth.”

Professor Wojciechowski projected the average annual inflation for 2024 to be approximately 3.7%, slightly below earlier market expectations. He emphasized that while November’s inflation data wasn’t surprising due to base effects, December’s figure is expected to reach 4.9%, consistent with broader economic trends.

Outlook for January and Beyond

Post-holiday sales and promotions could affect inflation in January. “While December is a boom for retail, January often sees spending slow significantly. Promotions and discounts could impact inflation figures, but it’s too early to draw firm conclusions,” noted Kuczyński.

As the year draws to a close, economists remain watchful of the interplay between domestic consumption patterns, global energy markets, and core inflation trends. Despite differing opinions on specifics, the consensus points to inflation nearing 5% in December, with broader economic implications extending into 2024.


Source: Manager Plus

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