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Is this a beginning of a slowdown in private consumption growth?

Retail sales significantly below 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 4.7% YoY in December vs. an 8.2% increase in November, running significantly below our forecast (8.9%) and the market consensus (7.7%). The sales growth rate in constant prices dropped to 3.9% YoY in December vs. 7.8% in November.

The slowdown in sales was wide ranging

It should be noted that the deceleration in retail sales growth in December was wide ranging – seven of the nine categories recorded a decrease in annual dynamics compared to December. The decrease in retail sales dynamics may result from the abatement of the effect of early Christmas shopping done in November. This phenomenon results from the growing popularity of shopping on so-called "Back Friday” (23 November, see MACROpulse of 21/12/2018).

However, this change in the Poles' shopping habits does not explain lower sales in the category "food, beverages and tobacco products” (down by 2.4% YoY in December vs. a 3.0% increase in November). These data are particularly surprising in the light of the "2018 Christmas Survey” prepared by Deloitte. According to the survey results, an average family was planning to spend – due to Christmas preparations - 7.6% more on food than in 2017. We therefore believe that the decrease in this category is not a sign of any negative tendencies in household demand for food.

Car sales have finally picked up

The main factor behind the acceleration in retail sales growth were higher dynamics in the category "motor vehicles, motorcycles and parts” (6.8% YoY in December vs. -1.4% in November). This is the effect of the gradually abating supply-side constraints in automotive concerns (significant delay in the certification of vehicles due to the implementation of new emission standards on 1 September 2018). Nevertheless, we expect that the rebound in sales in this segment will be limited in the coming months. In accordance with the consumer survey results published by the European Commission, the net percentage of households in Poland planning to purchase a car in the next 12 months stood in Q4 2018 at the lowest level since Q4 2017.

Is this a beginning of a slowdown in private consumption growth?

In the whole Q4 2018 retail sales in constant prices rose by 6.2% vs. a 5.6% increase in Q3, posing a slight upside risk to our forecast, in which private consumption growth rate dropped to 4.4% YoY in Q4 vs. 4.5% YoY in Q3. The slowdown in retail sales growth in December, combined with the deterioration in retail sales recorded in January 2019 (synthetic indicator has dropped to the lowest level since December 2016), is consistent with our scenario assuming a gradual decrease in the consumption dynamics in the coming quarters of 2019.

In our view, today's retail sales reading is slightly negative for PLN and bond yields.