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Consumption dynamics are knocking on the ceiling

Solid data on retail sales

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 5.9% YoY in November vs. a 5.4% increase in October, running significantly above our forecast equal to the market consensus (4.8%). The sales dynamics in constant prices increased to 5.2% in November vs. 4.6% in October.

Increasing popularity of “Black Friday” supports retail sales

It is worth pointing out that retail sales growth accelerated in November despite unfavourable calendar effects (in November 2019 the number of working days was 1 day lower from 2018 while in October 2019 it was the same as the year before). Conducive to faster sales growth were higher dynamics i.a. in the categories “sales in non-specialized stores” (e.g. hypermarkets), “furniture, radio, tv and household equipment”, and “pharmaceuticals, cosmetics, and orthopedic equipment”. Higher sales dynamics in these categories could be attributed to the effect of earlier (i.e. November) Christmas shopping. This phenomenon may have been supported by the growing popularity of shopping on “Black Friday” (29November). The increasing year by year November MoM sales dynamics for radio, tv and household equipment would support such hypothesis.

The main factor conducive to slower retail sales growth were lower dynamics in the category “motor vehicles, motorcycles and parts” (5.1% YoY in November vs. 6.8% in October) and “food and non-alcoholic beverages” (-0.1% YoY vs. 0.9% in October). It is worth noting that this has already been the second decrease in food in specialized stores recorded in the last three months. We again propose the hypothesis that the sales of food are limited by a sharp cumulative rise in its prices. We also believe that higher prices of food may result in more food purchases being made in non-specialized stores (like hypermarkets) whose prices are more competitive than in specialized stores.

Consumption dynamics knocking on the ceiling

The real retail sales dynamics between October and November (4.9%) stood above their average value for Q3 (4.8% YoY). In addition, the core sales measures we use, including retails sales excluding cars, point to a marked acceleration in the annual sales growth in November. This signals that the recovery in consumer demand is still strong. However, the deterioration in households' sentiment and slower real wage fund growth (see MACROpulse of 18/12/2019) suggests that the potential for recovery in consumption is limited. Therefore, we maintain our forecast in which the dynamics of private consumption are now close to their local maximum (3.8% YoY in Q4 2019 from 3.9% in Q3) and will be showing a downward trend in subsequent quarters (see MACROmap of 9/12/2019).

Today’s data on retail sales are slightly positive for PLN and bond yields, we believe.