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Sharp October drop in confidence

• Both of Poland's consumer confidence indicators declined in October compared with September.
• The current consumer confidence indicator fell to 14 points, one of the weakest readings in months.
• Households were more pessimistic about the economy and their own finances, while inflation expectations edged down slightly.
• Analysts see weaker sentiment about household budgets as the main driver, and the drop could curb consumption if it persists.

Statistics Poland (GUS) reported a marked deterioration in consumer sentiment in October. Both the current and forward-looking consumer confidence indicators fell compared with September (Ważne wskaźniki w dół. W październiku gorsze nastroje konsumenckie | Strefa Biznesu – strefabiznesu.pl) (Nastroje konsumentów w Polsce najgorsze od miesięcy. Nowe dane GUS pokazują spadek - rp.pl – rp.pl). The current indicator, which captures assessments of the present situation, dropped to 14 points. According to Rzeczpospolita, this is one of the weakest readings in months and one of the largest monthly declines in that period.

Households worried about their wallets

Respondents became more pessimistic about both the general state of the economy and their personal finances (Październik przyniósł pogorszenie nastrojów konsumenckich. I to niekoniecznie przez inflację - Bankier.pl – bankier.pl). The gauge of expected price changes over the next 12 months edged down slightly, which suggests that concern about rising prices was not the main driver of the decline. Analysts point to weaker sentiment about household budgets as the more important factor.

Implications for spending

Slower wage growth combined with weaker sentiment could curb consumption in the coming months, if the mood does not improve. Still, the readiness to make major purchases has held at a stable level despite the gloomier outlook. Economists will watch the next GUS releases to see whether the drop is a one-off or the start of a longer trend.