Further signals of GDP growth slowdown

Further decline of annual retail sales growth

In accordance with the GUS data published today, nominal retail sales growth reported by businesses having more than 9 employees went down to 19.9% YoY in June comparing to 23.6% in May, running slightly above our forecast (19.8%) and below the market consensus (21.5%). Retail sales in constant prices increased by 3.2% YoY in June comparing to an increase of 8.2% in May. Seasonally-adjusted retail sales in constant prices fell by 2.8% MoM in June, which represents the strongest decline since December 2021.

Real wage drop curbing the retail sales growth

The decline of growth in retail sales expressed in constant prices was seen across most categories, with the strongest drop reported in “solid, liquid, and gaseous fuels” (-12.6% YoY in June vs. -0.3% in May), “other” (11.0% vs. 18.0%), “pharmaceutical products, beauty products, orthopaedic equipment” (10.9% vs. 15.4%), “textiles, clothing, footwear” (13.2% vs. 17.7%) and “furniture, electronic goods and household appliances” (-7.0% vs. -4.0%) categories. In our opinion, it reflects the deteriorating consumer sentiments connected with the drop in real wages seen over the last couple of months (see MACROpulse of 21/07/2022) and economic growth slowdown (see MACROmap of 18/07/2022). This opinion is supported by the consumer sentiment survey results published by the GUS yesterday, i.e. the Current Consumer Confidence Indicator and Leading Consumer Confidence Indicator. Despite having risen slightly in July, the indicators still run on historically low levels. We believe that poor consumer sentiments will still be the main factor curbing the retail sales growth in the months to come.

Construction and assembly production growth much poorer than expected

In accordance with the data published by the GUS, construction and assembly production increased by 5.9% YoY in June comparing to a 13.0% growth in May, running markedly below the market consensus (10.8%) and our forecast (8.5%). Construction and assembly production growth between May and June was driven down by the statistical effect of an unfavourable difference in the number of business days (in May 2022, there were two days more than in 2021, while in June their number was the same as the year before). Seasonally-adjusted construction and assembly production shrank by 3.5% MoM in June. Consequently, it once again stood below the level reported in February 2020 (by 3.2%), which was the last month when the activity in the construction sector was not materially affected by the pandemic. Construction and assembly production drop had already been signalled by poorer business indicators in the construction sector, including in particular by the shrinking order portfolio, which was reflected in a lower capacity utilisation.

Activity in the construction sector is slowing down

As regards the production structure, particularly noteworthy is the continuing small growth in the construction and assembly production in the “civil engineering works” category (5.0% YoY in June vs. 3.9% in May), which is connected with a limited investment activity in the public sector. Low growth rate was also reported in the “specialised construction activities” category (-3.1% vs. 3.3%), which we think is connected primarily with a slowdown in terms of new business and housing investments. Production growth also slowed down markedly in the “construction of buildings” category (15.2% vs. 34.7%), which in our opinion reflects the fading of the effect produced by private (and particularly housing) investments commenced in the previous quarters. We continue to expect the activity in the construction sector to be curbed in the coming months by the growing barriers on the supply (lack of qualified workforce and a strong increase in the prices of construction materials) and demand side (poorer availability of mortgage loans and poorer demand for apartments bought for cash due to the uncertainty caused by the war in Ukraine).

We uphold our “soft landing” scenario

Today’s data on retail sales and construction and assembly production combined with yesterday’s data on labour market and industrial production in June (see MACROpulse of 20/07/2022) are consistent with a strong GDP growth slowdown that we expect to have taken place in Poland in Q2 (to 4.9% YoY from 8.5% in Q1). They confirm that the economic activity slowdown in Poland is gradual, which supports our "soft landing" scenario for the Polish economy for 2022 despite strong economic and geopolitical turbulences connected with the war in Ukraine (see MACROmap of 18/07/2022).

In our opinion, today’s data on retail sales and construction-assembly production are slightly negative for the PLN and the yields on Polish bonds.