Record car purchases and World Cup boosted sales growth

Subsequent solid retail sales data

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 10.3% YoY in June vs. a 7.6% increase in May, running significantly above the market consensus (7.9%) and our forecast (8.2%). The sales growth rate in constant prices went up to 8.2% in June vs. 6.1% YoY in May.

Record car purchases and World Cup boosted sales growth

The acceleration of real retail sales growth resulted primarily from higher dynamics of sales in the category "motor vehicles, motorcycles, parts” (9.8% YoY in June vs 3.3% in May). June is the month where car sales usually increase in monthly terms. This year, such increase amounted to 11.6% and, compared with June in the previous years, was the strongest since 2003, namely since when monthly retail sales data have been available in this category. The acceleration of retail sales growth also resulted from the increase in their annual dynamics in the category "furniture, radio, TV, and household appliances” (from 6.0% YoY in May to 14.4%), which, in our view, was to a large extent caused by a temporarily higher demand for TV equipment due to the FIFA World Cup. Indices of core sales, including retail sales without cars, furniture, radio, TV, and household appliances, point to a visible acceleration of sales growth in June in annual terms. This signals that the recovery in consumer demand remains strong.

Increasingly less room for improvement in consumer sentiment

We maintain our scenario, in which the next few months will see a moderate slowdown in sales in constant prices, due to the expected by us increasingly slow employment growth accompanied by limited wage pressure (see MACROmap of 21/5/2018). Our scenario is supported by the results of the July consumer sentiment survey released yesterday by GUS. They indicate that the annual increase of the Leading Indicator of Consumer Confidence is increasingly slower and amounted to 1.1 pts YoY in July vs. 2.2 pts. in June, the smallest annual growth since June 2013. Considering the expected tendencies in the labour market, any further significant improvement of consumer sentiment (which is very good anyway) in the coming months is unlikely, we believe.

Upside risk to our forecast of private consumption in H2 2018

We estimate that retail sales in constant prices rose by 6.1% YoY in Q2 vs. 8.1% in Q1. This is in line with our scenario of deceleration in private consumption growth in Q2 to 4.5% YoY vs. 4.8% in Q1. Due to the above-mentioned trends in the labour market, we expect a moderate slowdown in private consumption in H2 2018. However, the visibly better-than-expected data on retail sales in June indicate that consumer demand growth in H2 2018 may be faster than we expected. In addition, the data on industrial and construction-assembly production released in Q2 indicate an upside risk to our forecasts of exports and investments growth in Q2 and H2 2018. Our latest macroeconomic scenario for 2018-2019, including the current forecasts of the situation in Poland's external macroeconomic environment, will be published in MACROmap on 30/7/2018.

In our view, today's higher than expected reading of the June retail sales is slightly positive for PLN and bond yields.