Consumer confidence keeps declining in CEE

On the radar

• December’s Retail Sales (excluding automotive) in Czechia was published at 6.2% y/y, surprising to the upside.

• In the afternoon, central bank in Poland will announce interest rate decision. We expect no change.

Economic developments

Today, we will focus on consumer confidence in the region. Worryingly, it has been constantly declining since mid-2024. In January, the biggest deterioration in consumer confidence was reported in Romania, which dropped from -11.9 in December to -20.3 in January. On the other hand, in Czechia, Poland and Serbia, consumer confidence marginally improved in January. Despite such developments, consumer confidence is as low as it was at the end of 2023. The trajectory has been quite consistent across the CEE countries. After a wave of optimism in the first half of 2024, we have seen growing pessimism toward the end of last year. Consumer confidence is considered a leading indicator for the retail sector and private consumption growth.

Market movements

Today, the Polish central bank will announce its key interest rate decision. We expect rates to remain stable at 5.75%. Governor Glapinski's press conference on Thursday will be more interesting to watch for indications about monetary easing later in 2025. The CEE currencies strengthened against the euro on Tuesday, with EURHUF moving down most visibly to 407, the levels last seen in November 2024. Long-term yields have been marginally lower this week in most CEE countries. Croatia tapped the international bond market by issuing euro-denominated bonds. The 12Y papers were sold at MS+90bps, down from initial guidelines of MS+120bps. The size of issuance was EUR 2 billion, with books in excess of EUR 5 billion, marking solid demand. This meets Eurobond issuance targets under the current financing plans and also kicks off intensive issuance during February and March.

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