Following yesterday’s Daily on the PMI releases, today’s focus shifts to consumer sentiment at the beginning of the third quarter. Czechia and Slovakia recorded improvements in their respective indices, while sentiment in Croatia and Hungary remained broadly unchanged. The continued upward trajectory of the Czech index strengthens the narrative that domestic consumption will be the primary driver of economic growth this year. On the other hand, declines were observed in Poland, Serbia, Slovenia, and most significantly, Romania. In fact, Romania’s consumer confidence index fell to its lowest level in 32 months, with both the retrospective and forward-looking components deteriorating. This decline coincided with the government’s announcement of a fiscal consolidation package in early July, which included increases in VAT rates and excise duties effective from August 1. These measures are expected to erode disposable incomes in the near future. Additionally, the expiration of electricity price caps this month has further weighed on consumer sentiment.
Market movements
The FX market stabilized yesterday following last week’s volatility. However, the Polish zloty and Hungarian forint slightly weakened by 0.2% against the euro, partially correcting Friday’s rally that had been driven by dollar depreciation. In Romania, two government bond auctions were held yesterday. In the auction of ROMGBs maturing in 2027, RON 400 million was raised at an average yield of 7.23%. A larger-than-targeted volume of RON 500 million was borrowed through the auction of 6-year bonds, where demand surged to RON 1.4 billion, up from RON 808 million in the previous auction. The higher bid-to-cover ratio allowed for a slight reduction in the average accepted yield to 7.31%, compared to 7.33% achieved in the previous auction of the same paper a month ago.