Slower consumption growth ahead

Retail sales above market 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 7.5% YoY in December vs. a 5.9% increase in November, running below our forecast (8.2%) and above the market consensus (7.3%). The sales dynamics in constant prices increased to 5.7% in December vs. 5.2% in November.

Wide ranging acceleration in retail sales

It is worth pointing out that that the recovery in retail sales growth in December was wide ranging – eight out of nine categories have recorded higher annual dynamics compared to November, most likely due to the statistical effect in the form of a favourable difference in the number of working days (in November 2019 the number of working days was 1 day lower from 2018 while in December 2019 it was 1 day higher than the year before). The core sales measures we use, i.a. retail sales excluding cars, food and fuels, point to further recovery in consumer demand.

It should be pointed out that it has already been the third decrease in food sales in specialized stores recorded in the last four months. This supports our 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 – on the average, retail sales in this category were growing at double digit rates in recent months (in YoY terms).

Slower consumption growth ahead

We estimate that in the whole Q4 2019 retail sales in constant prices increased by 5.2% vs. a 4.8% increase in Q3, not altering our forecast in which the growth rate of private consumption dropped to 3.8% YoY in Q4 2019 vs. 3.9% YoY in Q3. Further deterioration in households' sentiment recorded in January and slowdown of real wage fund growth in Q4 2019 to the lowest level since Q4 2015 (see MACROpulse of 21/01/2020) support our scenario of slower private consumption growth in subsequent quarters.

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