Polish July Retail Sales Rise Faster Than Expected

By Dorota Bartyzel

Aug. 26 (Bloomberg) -- Polish retail sales rose faster than expected in July and the unemployment rate dropped to the lowest in 17 years, handing the central bank more reason to boost interest rates again.

Sales rose an annual 14.3 percent, compared with an advance of 14.2 percent in June, the Warsaw-based Central Statistical Office reported today. That topped the 14 percent median forecast of 14 economists in a Bloomberg survey. On the month, sales were up 1.8 percent. The jobless rate fell to 9.4 percent from 9.6 percent in June, the lowest since July 1991, the office also said.

Rate setters have indicated inflationary pressure may persist as Poles are buying more goods after their salaries grew an average 10 percent in two years. The central bank-led Monetary Policy Council has lifted borrowing costs 2 percentage points since April 2007 as the inflation rate more than doubled.

``Retail sales have remained strong, suggesting that consumer demand will remain the lynchpin of the stability of our economic growth,'' said Marcin Mrowiec, an economist at Bank Pekao in Warsaw. ``The declining unemployment rate will keep a lot of pressure on wages.''

After the last meeting on rates, policy makers also said they want to see more information to assess the impact of the global economic slowdown on local growth, which the government estimates will slow to 5.5 percent this year from 6.6 percent in 2007.

GDP Report

A report on second-quarter gross domestic product growth is due to be released on Aug. 29. The economy expanded 6.1 percent in the first quarter.

``The growth will be little lower in the second quarter than in the first one,'' said Halina Dmochowska, the vice chairwoman of the Central Statistical Office, at a press conference in Warsaw, according to PAP newswire.

Monetary policy makers, who start their two-day meeting today, will probably keep the key rate unchanged at 6 percent, according to all 17 economists in the Bloomberg survey. A rate decision will be announced tomorrow.

The zloty traded at 3.311 per euro at 10:55, little changed from earlier in the morning and down from 3.302 yesterday.

To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.netMaciej Martewicz in Warsaw at mmartewicz@bloomberg.net