Consumer prices still falling in Poland

photo - photo: Glow Images / East News

The consumer price index calculated by Poland's Central Statistical Office (GUS) remained negative for the second month running and stood at - 0.3 percent year-on-year in August. In month-on-month terms prices fell by 0.4 percent.

The index was mostly affected by declining food and fuel prices.

Economist Ryszard Petru has told Polish Radio that the trend is good for consumers, however.

“This is not bad deflation,” Petru said. “The bad one is when companies expects things to get worse and that is why they cut prices.”

Piotr Bielski, economist at Bank Zachodni WBK, said that the most important factor contributing to consumer prices declining, however, is Russia's embargo on Polish food.

“Food not sold to Russia is flooding European markets, which also have a lot of their own produce,” the economist said.

Bielski believes that Poland will continue to observe CPI deflation until the end of this year.

Both Petru and Bielski are convinced though that a few months of falling consumer prices will not affect long-term economic growth.

“If deflation lasts for the next few quarters, it could lead to Poles getting used to falling prices,” Petru said. “This could generate unfavourable behaviour from the part of businesses. However, now it is more of a temporary effect.”

In Bielski's opinion, lower prices will contribute to higher real purchasing power for households. “Even if salaries won't grow and prices fall only slightly, we will be able to buy more,” he said.

Adam Czerniak, economist at Polityka Insight, agrees.

“Short-term deflation may be positive for economic growth, because the lower the prices, the more we can buy for our earnings. This causes consumption to grow,” he said. (kw/pg)