Further signs of GDP growth slowdown
Retail sales exceed market expectations
In accordance with GUS data published today, nominal retail sales growth in the sector of companies employing more than nine employees increased by 33.4% YoY in April, up from 22.0% in March, running below our forecast (37.4%) and above the market consensus (30.6%). Retail sales in constant prices increased in April by 19.0% YoY against a growth of 9.6% in March. Adjusted for seasonal factors, retail sales in constant prices contracted by 0.8% MoM in April.
Retail sales supported by last year’s low base effects
The main factor contributing to a substantial increase in sales growth between March and April was last year’s low base effects related to the closure of shopping centres, as well as large-format furniture and home improvement stores (see MACROpulse of 24/05/2021). Consequently, the strongest growth of sales in real terms was recorded in the following categories: “clothing and footwear” (121.4% YoY in April vs. 41.9% in March), “furniture, electronic goods and household appliances” (27.9% vs. 2.8%) and “other retail sale in specialised stores” (38.2% vs. 7.3%) We believe that the influx of refugees from Ukraine to Poland is a strong driver of retail sales growth, although its exact impact is difficult to isolate due to strong statistical effects. However, we stand by our assessment that due to the rising cases of refugees returning to Ukraine and the decline in demand for items purchased on a one-off basis (clothing, footwear, furniture, electronic goods, household appliances), this effect will wane in the coming months (see MACROpuls of 13/05/2022). The persistent substantial growth of inflation remains a negative factor for retail sales as it erodes the purchasing power of households and leads to deterioration in consumer sentiment.
Decline in construction and assembly production
According to GUS data, construction and assembly production rose by 9.3% YoY in April relative to 27.6% in March. This reading was well below the market consensus (18.5%) and our forecast (20.0%). Seasonally-adjusted construction and assembly production contracted by 5.1% MoM in April. Thus, it was once again below (by 0.9%) the level seen in February 2020, i.e. a month in which the pandemic did not significantly impact construction sector activity. The main driver of the marked decline in the annual growth rate in construction and assembly production between March and April was statistical effects: a high base from the previous year (in April 2021, seasonally-adjusted production grew by as much as 4.9% MoM) and the unfavourable difference in the number of working days (in March 2022, this number was the same as in 2021, while in April it was one day lower than in 2021).
Continued recovery in private investments
A decline in the annual growth rate of construction and assembly production in April was recorded across all of its main categories: “civil engineering works” (1.4% YoY in April vs. 23.2% in March), “specialised construction activities” (6.6% vs. 13.7%) and “construction of buildings” (20.5% vs. 44.9%). As in the previous months, the continued high pace of growth in the “construction of buildings” category signals a recovery in private investments, including housing investments. We expect that in the coming months recovery in construction activity will be held back by increasing supply bottlenecks (lack of skilled workers and strong growth in the cost of building materials) and demand bottlenecks (reduced availability of housing loans and a decline in cash demand for housing related to the uncertainty accompanying the war in Ukraine). Such an assessment is supported by the seasonally-adjusted GUS business climate index showing the current portfolio of domestic orders in the construction sector, which fell to its lowest level since August 2021.
Further signs of GDP growth slowdown
Today’s data on retail sales and construction and assembly production, coupled with the data on the labour market and industrial production in April published on Friday (see MACROpulse of 20/05/2022) represent yet another signal of the strong slowdown in GDP growth in Poland in Q2 (to 3.1% YoY, down from 8.5% in Q1) that we expect.
Data on retail sales and construction and assembly production is, in our opinion, neutral for the PLN and yields on Polish bonds.