Strong fundamentals under geopolitical pressure. The monthly economic roundup

This article is a part of Poland Unpacked. Weekly intelligence for decision-makers

At the beginning of each month, we assess the state of the Polish economy, focusing on key macroeconomic indicators and the performance of financial markets. Data from the real economy sector covers June 2026, while financial market observations relate to July 2026.

Real economy: a resilient consumer

June’s macroeconomic data reflects the reality before the renewed escalation of the conflict between the United States and Iran on July 8. For roughly half of the month, the Islamabad memorandum was still in effect, intended to pave the way for a lasting agreement. As a result, analysing these figures is somewhat like looking in the rear-view mirror.

The picture of the Polish economy was highly optimistic. Retail sales measured at constant prices rose by 6.2% year on year in June. This was a very strong result, significantly better than the 3% year-on-year growth recorded in May. Seasonal factors explain part of the increase, but even after adjustment, growth remained robust, reaching 4.7% year on year.

Virtually every major category reported by Statistics Poland (GUS) recorded growth. The strongest increase was in sales of furniture, consumer electronics, and household appliances, which surged by 14.8% year on year. Demand was also strong for pharmaceuticals and cosmetics, up 10.2%. Consumers increased spending on cars, motorcycles, and parts (9.6%), as well as fuel (9%) and other goods (9.9%).

In the first half of the year, retail sales increased by 3.5% year on year, despite geopolitical turbulence between the United States and Iran. Several factors contributed to this performance. One was the government’s CPN (Lower Fuel Prices) programme, which prevented sharp increases in fuel prices. This meant consumers did not have to cut spending on other goods. In addition, precautionary fuel purchases boosted overall retail sales figures.

The most important factor, however, is high household savings. Over the past two years, Polish households have reported a greater willingness to save.

Real economy: strong industry

Industrial production also delivered excellent results. Measured at constant prices and adjusted for seasonal fluctuations, it increased by 5.5% year on year in June. This was higher than in May, when growth stood at 4.4%. Thanks to a favourable calendar effect, unadjusted production growth was even stronger, reaching 7.6% year on year.

Overall, manufacturing has performed well this year, especially considering that demand was held back in January and February by a cold winter and relatively weak economic conditions in the euro area. However, some sectors that are significant in terms of their scale in Poland have shown particular weakness. These include, above all, manufacturers of household goods—furniture producers and electrical appliance companies (consumer electronics and household appliances).

Construction and assembly output increased by 5.2% year on year, although after seasonal adjustment the increase was only 1.8%. Activity in civil engineering construction rose particularly strongly, by as much as 18.7% year on year. This suggests that long-awaited infrastructure projects financed by EU funds are finally getting underway.

Overall, industry and construction are moving in the right direction. Neither sector, however, is uniform: some areas are experiencing a boom, while others remain stagnant.

Real economy: looking ahead

Why, then, is this a case of looking in the rear-view mirror? First, the CPN programme has already been phased out. It was initially scaled back (with a reduction in excise tax in mid-June) and ended completely on July 1. Second, as mentioned earlier, the conflict between the US and Iran escalated again. In July, the price of WTI crude oil rose by more than 20%. In June, by contrast, it had fallen by the same amount.

This was already reflected in July inflation data. According to the so-called flash estimate, the consumer price index (CPI) rose by 3% year-on-year. Prices therefore increased faster than in June, when inflation stood at 2.5% year-on-year. The July increase would have been even higher if not for food deflation (a decline in prices), which amounted to 0.4% year-on-year. In June, food prices fell by 0.2%, meaning the decline deepened slightly.

Higher inflation in the coming months will translate into slower consumer spending growth unless the US–Iran conflict comes to an end. Another factor is the ongoing decline in the pace of nominal wage growth, which has continued for two and a half years. In June, wage growth was broadly unchanged compared with May (5.9% versus 5.8%), but the medium-term trend is clear.

Both of these factors will slow the growth of real wages. The government is considering relaunching the CPN programme, although in a more limited form. On the one hand, this is a consequence of President Karol Nawrocki’s veto of the windfall profits tax. On the other hand, it is also driven by weaker-than-expected VAT revenues.

Financial markets: stock market rally

In financial markets, July brought a slight change in the value of the zloty after major fluctuations in June. At that time, a hawkish speech by the new Fed Chair Kevin Warsh, combined with strong US economic data, increased expectations that interest rates would remain elevated for longer. This translated into a 3.8% weakening of the zloty. In July, however, the Polish currency strengthened against the US dollar by 0.7%.

The Polish stock market performed exceptionally well in July. The broad WIG index rose by 8.7%. Large-cap companies (WIG20) gained 9.3%, while mid-cap stocks (mWIG40) increased by 8.5%. Small-cap companies (sWIG80) performed the weakest, remaining virtually unchanged compared with June (+0.5%). Looking at the broader picture, Polish equities rank among the world’s top performers in terms of gains this year.

As expected, the Monetary Policy Council (RPP) left interest rates unchanged in July. The August meeting will last only one day and will not include any decisions on changes to NBP interest rates. It will be a so-called non-decision meeting. The rise in oil prices in July also led to a significant increase in the yields on Polish government bonds.

The latest data show that the Polish economy ended the first half of the year in very strong condition. In June, retail sales accelerated significantly, industrial output continued to grow at a strong pace, and the construction sector began to benefit from accelerating infrastructure investments. At the same time, performance across industries remains uneven – alongside sectors expanding rapidly, there are also those still struggling with weak demand.
June data reflect an economy before a significant shift in external conditions. The end of the CPN programme and the renewed escalation of the US–Iran conflict led to higher oil prices and a pick-up in inflation already in July. Combined with the slowdown in wage growth observed for an extended period, this could limit real wage gains and weaken consumption, which has so far been the main driver of economic growth.
July was a very strong month for the Polish stock market. The WIG and WIG20 indices rose significantly, making Polish equities among the world’s top performers this year. After sharp fluctuations in June, the zloty strengthened slightly against the dollar, while higher oil prices translated into increased bond yields. At the same time, the Monetary Policy Council left interest rates unchanged, in line with expectations.