Poland Shines in Central Europe

Poland reported strong retail sales today in contrast to Hungarian retail sales which posted their 29th consecutive monthly decline and a drop in economic sentiment in the Czech Republic. The Polish zloty is outperforming in the region, but all the (region's) currencies are gaining against the dollar today. After taking good money out of the long zloty short czech position last month, we have re-entered the position, looking for a test on the Aug 5 high near CZK6.34, from the current CZK6.2175.

Poland said today that July retail sales rose 5.7% from a year ago. The consensus was for around a 1.5% rise. In the month alone, sales rose 6.9% after a 2.2% increase in June. Poland is the only country in the region to avoid two consecutive contracting quarters. This year's growth is now expected to be nearer 1% than the 0.2% government forecast. The central bank meets tomorrow and no change in policy is expected. The 7-day reference rate is at a record low 3.5%. It is too early to expect a hike, but Poland may be added to the list of countries that will likely be among the first to tighten policy, following Israel's surprise move yesterday.

Hungary's retail sales have fallen for more than two years now. They are off 2.3% year-over-year in June after a 4.2% decline in May. On the month, sales were up 0.5%, the first increase since January. The government raised the value-added-tax in July, which is unlikely to do retail sales any favors and the increase in sales in June probably reflected efforts to front-run the tax increase. The government expects the Hungarian economy to contract by 6.7%, the steepest drop since the end of Communism.

Czech reported that its composite indicator of business and consumer sentiment fell in August to -10.6 from -9.8 in July. This reflected an erosion of business sentiment, which was partly blunted by a small increase in consumer sentiment. The economy expanded by 0.3% in Q2.
Poland Shines in Central Europe Poland Shines in Central Europe Reviewed by magonomics on August 25, 2009 Rating: 5
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