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Consumers have regained their appetite

Retail sales above 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 6.6% YoY in January vs. a 4.7% increase in December, which was above the market consensus (6.1%) and our forecast (5.3%). The sales growth rate in constant prices rose to 5.2% YoY in January vs. 3.9% in December.

Consumers have regained their appetite

We estimate that the main factor behind the acceleration of retail sales growth were higher dynamics of sales in the category "food, beverages and tobacco products” (5.2% YoY in January vs. -2.4% in December). This confirms our last month's assessment that the December's decrease in this category was temporary and was not a sign of any negative tendencies in household demand for food (see MACROpulse of 22/1/2019). The main factor limiting retail sales growth were lower dynamics in the category "motor vehicles, motorcycles, parts” (-0.9% YoY in January vs. 6.8% in December). The weakening of sales in this category was signaled earlier by the consumer survey results published by the European Commission, according to which the net percentage of household in Poland planning to purchase a car in the next 12 months stood in Q4 2018 at the lowest level since Q4 2017.

Consumption will slightly accelerate in Q1

The dynamics of real retail sales in January decreased compared to its average value in Q4 (5.8% YoY). In addition, it is worth noting GUS data published this week, which pointed to a continuation of the decline in both the current and the leading consumer sentiment indicator. However, taking into account January data on the labour market (see MACROpulse of 19/2/2018) we still see a slight upside risk to our forecast of retail sales dynamics in Q1 (4.2% YoY vs. 3.9% in Q4).

In construction there is no reason to be worried

According to GUS data, the construction-assembly production dynamics decreased to 3.2% YoY in January vs. 12.2% in December. Its decrease was largely a result of last year's high base effect (construction-assembly production grew by 8.4% MoM in January 2018) and of unfavourable weather conditions. Especially noteworthy in the data structure is the increase in construction-assembly production in the segment "civil engineering” (15.3% YoY in January vs. 11.4% in December). It indicates a continuingly high investment activity of the public sector. At the same time, according to the GUS business survey results for construction, seasonally adjusted indicator of domestic orders portfolio reached the highest level since February 2018. This supports our scenario, in which deceleration of construction-assembly production growth in 2019, associated mainly with the expiration of the public investment cycle (including the end of local governments' "investment peak”), will be mild. Data on the construction-assembly production combined with industrial production data published yesterday signal an upside risk to our forecast of economic growth in Q1 (3.7% YoY vs. 4.9% in Q4 – see MACROpulse of 20/2/2019).

In our view, today's retail sales and construction-assembly production readings are neutral for PLN and bond yields.