Surprisingly low food sales

Lower retail sales dynamics in July

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 9.3% YoY in July vs. a 10.3% increase in June, running above the market consensus (8.4%) and slightly below our forecast (9.6%). The sales growth rate in constant prices dropped to 7.1% YoY in July vs. 8.2% in June.

Surprisingly low food sales

The main factor behind the deceleration of retail sales growth in July were lower dynamics of sales in the category "food, beverages and tobacco products and "other retail sales in non-specialized stores”, including i.a. hypermarkets. The decrease in the dynamics resulted from surprisingly lower month-on-month sales in these categories (down by 3.4% and 0.4%, respectively). These categories usually record month-on-month increases in July. In addition, the MoM changes in these categories in July 2018, compared to same month in previous years, were the lowest since at least 2003. Therefore, we believe that the deceleration in the annual sales dynamics in said categories was an outlier observation and that the dynamics will increase again in subsequent months.

Conducive to slower retail sales growth rate in July 2018 were also lower dynamics in the category "furniture, radio, TV, and household appliances”, caused by the abatement of a positive temporary effect, namely the sharp increase in demand for TV equipment due to World Cup in June 2018 (see MACROpulse of 20/7/2018).

Sales data signal stabilization of consumption dynamics

The July data support our forecasts of a slowdown in retail sales growth, due to the expected by us increasingly slow employment growth occurring amid limited wage pressure. Such tendencies have been confirmed by the labour market data published by GUS last week (see MACROpulse of 17/8/2018). At the same time, they do not alter our forecast of stabilization of consumption growth in Q3 (4.6% YoY vs. similar dynamics in Q2).

In our view, today's reading of the July retail sales is neutral for PLN and bond yields.