Retail sales decline
In accordance with the GUS data published today, nominal retail sales reported by businesses having more than 9 employees went down to 18.3% YoY in October comparing to 21.9% in September, running below the market consensus (21.0%) and our forecast (19.0%). Retail sales in constant prices grew by 0.7% YoY in October vs. 4.1% in September. Seasonally-adjusted retail sales in constant prices shrank by 1.3% MoM in October, which indicates that the scenario assuming a gradual slowdown in consumer demand that we have been communicating over the last couple of months is beginning to materialise (see, for example, MACROpulses of 22/08/2022 or 21/09/2022).
Consumer demand slowdown seen in a wide range of categories
The data structure indicates that the growth in retail sales in constant prices slowed down in all categories, which is consistent with the scenario assuming a gradual slowdown in consumer demand. At the same time, annualised sales continued to fall in such categories as “furniture, electronic goods and household appliances” (-5.0% in October vs. -4.3% in September) and “motor vehicles, motorcycles, parts” (-5.5% YoY vs. -2.9%), which is indicative of households’ weakening demand for durable goods. Particularly noteworthy is also the continuing, significant decline in the “fuels” category of retail sales (-20.5% YoY in October vs. -20.4% in September), which shows that consumers are buying less fuel because of high prices.
Consequently, retail sales data support our consumption forecast for Q4 (0.5% YoY vs. 0.8% in Q3). They are also consistent with our conclusion, which says that the annual consumption growth will not exceed 0.5% YoY in the entire horizon of our forecast, i.e. until the end of 2023.
Temporary construction and assembly production growth
In accordance with the data published by the GUS, construction and assembly production increased by 3.9% YoY in October comparing to a 0.3% growth in September, running markedly above the market consensus (0.9%) and our forecast (-1.0%). Seasonally-adjusted construction and assembly production increased by 5.0% MoM in October.
As regards the data structure, particularly noteworthy is the continuing, strong construction and assembly production growth in the “construction of buildings” category (8.9% YoY in October vs. 8.7% in September). In our opinion, it resulted from the completion of private investment projects, particularly the housing ones, which had been started in previous quarters. However, it is worth noting that this effect will be fading in the coming months, driving the activity in the construction sector down. Production growth could also be seen in the “civil engineering works” (0.0% YoY in October vs. -2.3% in September) and “specialised construction activities” (5.1% vs. -4.9%) categories. However, we believe it to be temporary, and, given the strong constraints on the supply (a strong growth in the prices of construction materials) and demand sides (poorer availability of mortgage loans and poorer demand for apartments bought for cash in relation due to the uncertainty caused by the war in Ukraine), we expect the activity in the construction sector to gradually keep falling in the months to come.
Retail sales and construction and assembly production data consistent with the “soft landing" scenario for the Polish economy
Today’s data on retail sales and construction and assembly production combined with yesterday’s data on industrial production and employment and average wages in the enterprise sector (see MACROpulse of 22/11/2022) do not cause us to change our GDP growth forecast assuming a further slowdown in Q4 (0.8% YoY vs. 3.5% in Q3). This means that our "soft landing” scenario is materialising. In this scenario, GDP growth in Poland in 2023 will remain positive despite a significant slowdown (1.2% YoY vs. 4.5% in 2022 and 6.8% in 2021).
In our opinion, today’s data are neutral for the PLN and the yields on Polish bonds.