Here’s your morning brief – everything you need to know about what’s happening in the economy right now.
New old problem in Russia: inflation now rises to 8.6 percent
Inflation in Russia rose to 8.6% in June. This is its highest level there since February 2023. Exactly one year ago, in June 2023, it was small and amounted to only 3.3%, but since then it has more than doubled. Food, fuel and services are getting more expensive. For example, vegetable prices are on average 19% higher than a year ago.
Inflation rate in Russia. Source: tradingeconomics.com / Other
The Russian central bank has been fearing such a development for some time now, and it will probably raise interest rates at its next meeting on July 26. Analysts quoted by Bloomberg are talking about a 1-2 percentage point increase from the current level of 16%. This means that the rates in Russia will be almost at the same level as in February and March 2022, when central bank raised it to 20 percent to save the weakening ruble just after Russia attacked Ukraine.
That move resulted in a year-long recession, during which inflation fell to around 2.5 percent. The central bank lowered interest rateswhich helped revive the economy, but a side effect of the revitalization is also rapidly growing inflation. So in a moment, interest rate hikes will be able to cool down not only inflation again, but also economic growth.
Russian Central Bank In previous months, he had already been loudly signaling that the Russian economy was overheated and unstable. Rapid economic growth is being fueled by the war industry, as well as large consumption with money that is increasingly flowing to households, including from the government. On the other hand, sanctions and a huge problem with finding workers (because a large part of them have fled the country or been conscripted into the army) mean that supply generally cannot keep up with the rapidly growing demand – hence the renewed problem with inflation.
Another voice from the Monetary Policy Council about the possibility of a rate cut in 2025
In Poland, inflation is slowly starting to bounce back after falling to 2 percent a few months ago, but it is still growing slower than previously expected by, for example, National Bank of Poland and some of the market analysts. It is less than 3 percent but electricity and gas price increases introduced from July are to cause it to be around 5 percent by the end of the year and maybe even above 6 percent in the first months of 2025 – at least that is what the NBP forecasts. Then, however, it is to start falling again towards 3 percent.
And that’s probably whya contribution from Cezary Kochalski from the Monetary Policy Council The Council will be able to consider the next NBP inflation projection in March 2025. transition to interest rate cuts. This is yet another statement from someone from the MPC in recent days, which allows for possible rate cuts next year. Ludwik Kotecki and Henryk Wnorowski also mentioned this recently. For several days now, such statements can be classified as controversial, because they are in contrast to what he said at his last press conference President of the National Bank of Poland, Adam Glapiński. In his opinion, there will be no rate cuts in Poland even until 2026. This statement caused some consternation a week ago, because people running central banks around the world very rarely present such specific forecasts that go so far into the future. Now it also looks like this time, President Glapiński did not represent the views of a large part of the Council in this statement.
The French president does not want to appoint a new prime minister for now
In France, it is still unclear who will form the new government, but it turns out that President Macron does not mind that much. He wrote a letter to politicians in parliament, which is his first public statement after the elections, after which it will be extremely difficult to build a majority coalition in Paris. However, Macron is encouraging this and suggests that it could include all the forces “republican, who value the rule of law, a common Europe and the defense of French independence”. According to political commentators, Macron would like a coalition that includes all apart from Marine Le Pen’s party on the right and Jean Luc Melenchon’s party on the left.
The most important specific result of this is that Macron has decided not to name anyone for the position of prime minister at the moment, but to wait until the talks on building a broad coalition in parliament bring some effect. This is in contradiction to the increasingly loud demands of the French left, which after the elections has the most seats, for the president to name someone from their ranks as prime minister. The problem, however, is that they themselves have not yet reached an agreement among themselves on who the new prime minister should be.
As a result, France will have exactly the same government for some time to come as before the elections, and nothing will change for now. The French constitution does not impose any deadlines on the president when it comes to appointing a new government after elections, so this situation could last quite a long time. The first serious problem will probably arise when it is necessary to pass next year’s budget – at that point it will be necessary to form some kind of majority in the French parliament.
One third of rural residents do not use the internet
Almost one third of rural residents in Poland do not use the Internet. These are quite surprising results of the study conducted by CBOS. In general, 77% of adult citizens in Poland use the internet, with almost 100% in the groups up to 45 years of age. The situation changes among older people. This percentage drops to 86% in the group of 45-54 years, 67% in the group of 55-64 years, 50% in the group of 65-74 years and only 25% for people over 75 years of age.
This cross-section is quite easy to understand – the invention of the Internet appeared in Poland less than 30 years ago, so it can be assumed that people up to about 40 years of age have already grown up with it, while older people have not.
The geographical breakdown is perhaps even more interesting, as it turns out that while 96% of people in the largest cities use the Internet, in rural areas only 68%, or just over two thirds. This can probably be partly explained by the fact that young people often migrate from rural areas to cities, and as a result, there is a greater predominance of older people there than in cities, who, as we already know, do not use the Internet more often.
The CBOS study also shows that we often trade online. As many as 41% of respondents, or 53% of people using the internet, have sold something online at least once. On the other hand, 69% of internet users bought something online in the last month before the study.
Sentiment in Polish companies worst since August 2023
The mood among Polish entrepreneurs is clearly deteriorating. The MIK (Monthly Business Climate Index) indicator calculated by the Polish Economic Institute fell to 96.8 points in July, the lowest since August last year.
Readings below 100 points indicate an advantage of pessimists, and above – optimists. The MIK was above 100 points just two months ago, and has remained there almost continuously since November last year. The improvement in sentiment observed at that time was consistent with forecasts of an upcoming economic recovery. Now, however, something is clearly and quite quickly going wrong.
70% of companies say that high staff costs have become an obstacle to their operations. 60 percent indicate high energy pricesand 57 percent complain about uncertainty of the economic situationIn addition, over 40 percent of companies indicate payment backlogs and problems with finding people to work.
We have the highest percentage of companies reporting a drop in sales since September last year and the highest drop in orders since December. More and more companies are also reporting that their production capacity is too large in relation to their order portfolio. Employment is growing, but at the slowest rate since August last year.
