Poland's economy gains momentum at start of 2017

Polish industrial output and retail sales rose at their fastest pace since 2011 in January, data showed on Friday, confirming the European Union's largest eastern economy has rebounded from its slowdown last year. The data also showed rising inflationary pressures, with producer prices rising by a higher-than-expected 4.1 percent, the strongest in 4-1/2 years.
Industrial output rose by 9 percent year-on-year last month, the statistics office data showed. Economists polled by Reuters expected the figure at 7.8 percent. "The Polish economy noted a solid start to the year," economists BNP Paribas said. "Today's data are consistent with a tighter monetary policy stance in the quarters to come."
Data published on Monday also showed retail sales rising by a higher-than-expected 9.6 percent year-on-year last month in inflation-adjusted terms, their fastest pace in 5 years.
Construction output rose by an annual 2.1 percent in January, emerging from more than a year of declines. "Encouragingly, the construction sector, which was a drag on growth last year, has come out of its slump," William Jackson, economist at Capital Economics said. "This appears to be due to the fading impact from lower inflows of EU structural funds." Poland's $450 billion economy slowed last year due to, among other things, weaker inflows of European Union aid that hit investment and construction.
Consumption remained robust, and supported the government's new child benefit worth 1 percent of gross domestic product in 2016 alone. Economists polled by Reuters expect the economy to grow by 3.2 percent this year, helped by the accelerating inflow of EU aid. Economic growth slowed to 2.8 percent in 2016 from 3.9 percent the previous year.
] The data suggest growth may have picked up to as much as 3.5 percent at the start of 2017, Capital Economics' Jackson said. Growth stood at 2.7 percent year-on-year in the last quarter of 2016. The central bank has kept the key interest rate at a record low of 1.5 percent since 2015. Economists polled by Reuters expect the bank to start raising rates early in 2018.