The economy returns to a steadier course. Monthly 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 the key macroeconomic indicators and developments in the financial markets. The data for the real economy cover May 2026, while the financial-market observations relate to June 2026.

Real economy: inflation stabilizes

May’s macroeconomic data still reflect conditions before the announcement of the preliminary agreement between the United States and Iran in mid-June. Throughout May, WTI crude oil futures fluctuated between USD 90 and USD 105 per barrel. Following the announcement, prices fell to almost their pre-war levels. In Poland, the Lower Fuel Prices program (Ceny Paliw Niżej, CPN) was still in force. It reduced VAT on motor fuels from 23% to 8%, cut excise duties and introduced a temporary fuel price cap. The measures were phased out gradually – beginning with the excise-duty cuts in mid-June – and expired completely on July 1.

Against this backdrop, the latest inflation reading came as a pleasant surprise. Poland’s consumer price index (CPI) rose by 2.5% year on year in June, compared with the market consensus of 2.7%. The main driver was slower growth in fuel prices, but food prices also declined. As a result, financial markets now expect the Monetary Policy Council (RPP) to leave interest rates unchanged at its meeting this week.

Average gross monthly wages in the enterprise sector increased by 5.8% year on year in May, reaching almost PLN 9,200 (around EUR 2,150). That was slightly faster than in April, when wage growth stood at 5.4% year on year. Looking at the broader trend, however, wage growth continues to moderate.

This slowdown is a natural consequence of wider developments in the economy. First, with inflation now broadly under control, workers are making fewer demands for higher pay. Second, households have already recovered the earlier period of declining real wages, when inflation outpaced nominal wage growth. Third, both the statutory minimum wage and salaries in the public sector increased by only 3% year on year in 2026.

Real economy: solid fundamentals

Retail sales in constant prices rose by 3.0% year on year in May. That is a respectable result, although below the market consensus of 3.6%. At the same time, it marked a clear improvement on April’s disappointing 1.3% year-on-year increase.

Looking at the broader picture, however, retail sales are expanding more slowly than they did last year. Excluding April, May delivered the weakest reading since June 2025. In the first five months of 2026, retail sales increased by 2.9% year on year, compared with 3.5% in the same period of 2025.

In our view, May's figures provide a more accurate picture of underlying consumer demand than the previous two months. March’s exceptionally strong reading (8.7% year on year) was inflated by one-off factors, while April's weak result (1.3%) was heavily affected by geopolitical tensions.

Seasonally adjusted industrial production in constant prices rose by 4.4% year on year in May, up from 2.5% in April. The result is encouraging, although it was partly boosted by higher output in energy-related sectors, including mining and quarrying as well as electricity generation.

Manufacturing alone posted more modest growth of 2.5% year on year, compared with 1.6% in April. While hardly spectacular, the figures nevertheless highlight the resilience of Polish manufacturing despite weak economic conditions across the euro area.

Construction and assembly output also accelerated, increasing by 4.8% year on year in constant prices, up from 3.1% in April.

Overall, the data are solid rather than spectacular. Activity in the construction sector has picked up, but much of the improvement reflects a favorable base effect from last year. More importantly, there is still little sign of the investment boom that many had expected as Poland races to absorb funding available under the National Recovery Plan (KPO) and the EU budget.

Financial markets: a stronger dollar, weaker equities

June was an unusually eventful – and at times counterintuitive – month for global financial markets. The US dollar strengthened against the euro and, as a result, also appreciated against the Polish zloty by almost 4%. The main catalyst was a relatively hawkish speech by the new chair of the Federal Reserve, Kevin Warsh. Combined with continued strength in the US economy, his remarks reinforced expectations that US interest rates would remain higher for longer.

Meanwhile, the European Central Bank (ECB) raised its key interest rate by 25 basis points in June, taking it from 2.0% to 2.25%. It was the ECB’s first rate move since mid-2025 and its first increase since September 2023. Even so, weaker economic data from the euro area prevented the euro from gaining ground.

After two months of strong gains on Wall Street – particularly in the NASDAQ – June was broadly flat, despite the preliminary agreement between the United States and Iran. Investors have become increasingly skeptical of the lofty valuations attached to artificial-intelligence companies, tempering market enthusiasm.

These developments also weighed on the Polish stock market. A weaker zloty reduces returns for foreign investors when local equity indices post similar gains, making Polish assets less attractive. As a result, the main indices on the Warsaw Stock Exchange ended the month lower. The WIG fell by 1.0%, the WIG20 by 2.7%, the mWIG40 by 1.9%, and the sWIG80 by almost 5.0%.

Easing geopolitical tensions also led to a marked decline in the yields on Polish government bonds. The yield fell from around 5.64% at the end of May to 5.30% by the end of June – a drop of 34 basis points. Yields remain above the levels seen before the outbreak of the Iran war, but a substantial share of the earlier increase has now been reversed – a development that is likely to be welcomed by Poland’s finance minister.

The latest data suggest that the Polish economy has entered a more stable phase. Inflation has returned to the central bank's target, economic activity continues to expand at a solid pace, and labor-market conditions remain healthy despite slower wage growth.
June was marked by a stronger US dollar in global financial markets. The currency appreciated against both the euro and the Polish zloty following the new Federal Reserve chair’s hawkish messaging and another round of robust US economic data. Meanwhile, the Warsaw Stock Exchange (GPW) ended the month in negative territory, reflecting both the weaker zloty and deteriorating global sentiment toward technology stocks. One bright spot was the sharp decline in yields on Polish government bonds, which reflected easing geopolitical tensions and improving sentiment in the bond market.
The Polish economy remains in good shape. The biggest positive surprise was the decline in inflation to 2.5% year on year, increasing the likelihood that interest rates will remain unchanged. At the same time, wage growth continues to moderate, while retail sales, industrial production and construction output all remain on a positive trajectory. The data point to steady economic growth, although the long-awaited investment boom linked to funding from Poland's National Recovery Plan and the EU budget has yet to materialize.