Economic growth in Q3 looks quite good

Retail sales growth coming back to normal

In accordance with the GUS data published today, nominal retail sales reported by businesses having more than 9 employees went up by 11.1% YoY in September comparing to a 10.7% growth in August, running above the market consensus (10.4%) and our forecast (8.4%). Retail sales in constant prices grew by 5.1% YoY in September vs. 5.4% in August. However, the continuing, strong growth in prices was driving the real retail sales down. Retail sales deflator went up from 5.0% in August to 5.7% YoY in September, reaching the highest level in the recorded history. Seasonally-adjusted retail sales in constant prices grew by 0.2% MoM in September, reaching a level 2.8% higher than in February 2020, which was the last month in which sales were not materially affected by the COVID-19 pandemic.

September was the first month to see the retail sales growth boosted by low base effects connected with the negative impact of the second wave of the pandemic on the economic activity in Autumn 2020. This effect will have a positive impact on sales growth, and it will persist in the months to come. This is because most of the months between September 2020 and April 2021 saw a decline in seasonally-adjusted monthly production. However, sales growth will be curbed by a deterioration in consumer sentiment. In October, both the current and the leading consumer confidence indicator stood at their lowest level since April 2021. We expect the real retail sales growth to go back above 6% YoY soon.

Weak construction and assembly production data

In accordance with the data published by the GUS, the construction and assembly production increased by 4.3% YoY in September comparing to a 10.2% growth in August, running markedly below the market consensus (8.3%) and our forecast (8.8%). Construction and assembly production growth was largely driven down by the statistical effect of an unfavourable difference in the number of working days between August and September (in August 2021, there were two days less than in August 2020, while in September 2021, the number of working days was the same as in the previous year). Seasonally-adjusted construction and assembly production shrank by 2.0% MoM in September, and it remains well below the February 2020 level (9.1% lower).

As regards the data structure, particularly noteworthy is the continuing strong growth in construction and assembly production dynamics in the “specialised construction activities” category including site preparation works (21.7% YoY in September vs. 29.7% in August). This supports our scenario in which we will see recovery in the construction sector in the quarters to come. The values describing production dynamics in the remaining two segments of the construction sector (“civil engineering works” and “construction of buildings”) ran close to zero. The developments in public investments due to the approval of the National Recovery Plan having been postponed by the European Commission remain a significant risk factor for our scenario for the recovery in the construction sector.

Economic growth in Q3 looks quite good

Today’s data on retail sales and construction and assembly production combined with yesterday’s data on industrial production (see MACROpulse of 20/10/2021) support our forecast, in which Polish GDP in Q3 2021 will increase by 4.5% YoY comparing to an 11.1% increase in Q2. At the same time, today’s data is neutral for the PLN and the yields on Polish bonds.