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Food sales making up for losses

Retail sales significantly 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 5.4% YoY in October vs. a 5.3% increase in September, running above our forecast (4.0% YoY) and the market consensus (5.1%). The sales dynamics in constant prices increased to 4.6% in October vs. 4.3% in September. The annual retail sales increased in October despite the statistical effect in the form of an unfavourable difference in the number of working days (in September 2019 the number of working days was 1 day higher from 2018 while in October 2019 it was the same as the year before) and the last year’s high base effect in the category “motor vehicles, motorcycles, parts”. This effect has contributed to the drop in sales dynamics in constant prices in this category to 6.8% in October from 10.7% YoY in September.

Food sales making up for losses

Especially noteworthy in the structure of the October retail sales is a sharp increase in the sales of food in specialized stores. In constant prices, the sales in this category increased by 0.9% YoY vs. a 2.9% decrease in September (in monthly terms, nominal sales of food rose by 8.8% MoM). This signals that the formulated by us last month hypothesis on the negative impact of a sharp cumulative rise in food prices on the demand for foodstuffs (see MACROpulse of 21/10/2019) has not yet been confirmed. The data on retail sales in November 2019 will enable an in-depth verification of this hypothesis.

Higher minimum wage will offset the negative impact of lower employment growth on consumption

In October, the 6-month rolling averages for the annual real sales dynamics in the categories “furniture, radio, tv and household equipment” and “sales in non-specialized stores”, being a barometer of the strength of consumer demand, remained at a high level (9.7% and 12.5%, respectively). A high growth rate of sales in constant prices excluding cars, fuels and foodstuffs sold in non-specialized stores (6.8% YoY vs. 7.3% in September) also suggests a strong tendency for an increase in consumer demand.

Conducive to higher annual consumption dynamics (especially in services which are not covered by the monthly data on retail sales) remain the extended 500+ scheme and the continuingly very good consumer sentiment, reflected by the households’ high propensity to make “major purchases”, recorded in GUS surveys. The recorded in recent months slowdown of corporate employment growth, contributing towards slower growth of the real wage fund and, consequently, slower increase in consumer demand (see MACROpulse of 21/11/2019), has an opposite impact. Starting from 2021 this effect will be offset by a sharp increase in the minimum wage resulting in higher wage dynamics and higher wage fund.

Deceleration of consumption growth in Q4 is less likely

Today’s data on retail sales signal a slight upside risk to our forecast assuming the deceleration of consumption growth in Q4 (4.4% YoY vs. 4.6% in Q3). The verification of our scenario for consumption in H2 2019 will be possible after the publication of data on GDP structure in Q3 scheduled for this Friday.

Today’s data on retail sales are neutral for PLN and the prices of the Polish debt.