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New emission standards limited retail sales growth

Retail sales below expectations

In accordance with the Polish Central Statistical Office's (GUS) data that have been released today, retail sales in enterprises employing more than 9 people increased in current prices by 5.6% YoY in September vs. a 9.0% increase in August, running significantly below our forecast (8.2%) and the market consensus (7.6%). The sales growth rate in constant prices dropped to 3.6% YoY 6.7% vs. 6.7% in August.

New emission standards limited retail sales growth

Lower real retail sales dynamics in September resulted mainly from slower sales growth in the category "motor vehicles, motorcycles, parts” from 11.0% in August down to -4.3% in September. This was the effect of the entry into force of new emission standards from 1 September 2018 which boosted sales growth in this category in July and August and were responsible for their sharp decline in September. Our view is supported by data on the number of registered new vehicles which increased by 64.3% YoY in August and dropped to -26.4% in September. At the same time, it should be noted that sales growth in the automotive branch will not accelerate again from month to month, which means that this category will limit overall retail sales growth in the coming months.

Wide range of deceleration in retail sales

With the exception of "fuels” and "other goods”, other categories have also recorded lower sales growth rate. In the context of good households' sentiment, slower sales in September most probably resulted from the unfavourable calendar effects and, therefore, the lower growth rate should not be treated as a sign of negative tendencies. In accordance with the results of GUS consumer sentiment survey, the indicator "current major purchases” reached a subsequent historical maximum in October.

Conducive to lower retail sales dynamics in the category "textiles, clothing, and footwear” were additionally the high base effects from the year before. Due to the exceptionally cold September in 2017, the increase in the purchase of clothes and footwear from the autumn-winter collection took place earlier than usual.

No concerns about consumption

The average dynamics of real retail sales dropped to 5.8% YoY in Q3 vs. 6.1% in Q2. Thus, the August retail sales reading supports our forecast of consumption growth in Q3 (4.8% YoY vs. 4.9% in Q2). Private consumption in Q3 and Q4 will be boosted by disbursements under the "Good Start” scheme (PLN 300 per child). We estimate that they will increase the annual consumption growth in those quarters by 0.2 pp. Consequently, despite the last year's high base effect, the annual consumption dynamics in Q4 will decrease only slightly in comparison with Q3 (by 0.1 pp).

In our view, today's retail sales reading is slightly negative for PLN and bond yields.