Retail sales impacted by war in Ukraine
In accordance with the GUS data published today, nominal retail sales dynamics reported by businesses having more than 9 employees decreased to 16.5% YoY in February comparing to 20.0% in January, running close to the market consensus (16.7%) and below our forecast (17.4%). Retail sales in constant prices grew by 8.1% YoY in February vs. 10.6% in January. Seasonally-adjusted retail sales in constant prices increased by 1.4% MoM in February.
Even though the war in Ukraine broke out towards the end of the previous month (24 February), its impact on the structure of retail sales in February was significant. The war contributed to a strong increase in the sales of fuels expressed in constant prices (22.1% YoY in February vs. -2.2% in January). Purchasing food with the aim of saving it for the future as well as to help the refugees drove the retail sales growth up in the "food, beverages and tobacco” category (6.6% YoY vs. 3.6% in January). Furthermore, the increased uncertainty surrounding the development of situation in Ukraine drove the purchases of durable goods down, which is reflected in the sales dynamics decline in such categories as “motor vehicles, motorcycles, parts” (-20.0% YoY in February vs. -13.1% in January) and “furniture, electronic goods and household appliances” (-4.4% YoY vs. -0.1% YoY).
In our opinion, saving for the future as the motivation for buying food and fuels has decreased significantly in March. However, an extra demand connected with the inflow of Ukrainians to Poland will be a lasting factor supporting turnover in the retail trade. However, high (and growing) inflation, which curbs the consumers’ real purchasing power will be driving the sales down. In our opinion, the factors described above will ultimately result in a slight slowdown of retail sales growth in March. We maintain our opinion saying that forced savings accumulated during the pandemic remain a significant source of financing the households’ expenses. Today’s data has no impact on our forecast, in which the consumption growth will fall to 7.3% YoY in Q1 2022 vs. 7.9% in Q4 2021.
Correction in the construction sector
Data on construction and assembly production has come as a huge surprise, with construction and assembly production increasing by 21.1% YoY in February comparing to a 20.8% growth in January, and running below the market consensus (23.1%) and above our forecast (15.0%). Seasonally-adjusted construction-assembly production decreased in February by 6.0% MoM. Today’s data confirms that the strong production growth seen in January (+19% MoM, representing the highest monthly growth in the history of data) was a one-off phenomenon, and could have resulted, for example, from the accumulation of reports following the completion of construction projects that were actually finished a couple of months earlier (see MACROpulse of 21/02/2022).Consequently, construction and assembly production in February 2022 continued to run below the level reported in February 2020, which was the last month when the pandemic had no significant impact on the activity in the construction sector.
A slight acceleration of the construction and assembly production growth in February resulted from a slowdown of growth in the “civil engineering works” category (2.9% YoY in February vs. 7.6% in January), an acceleration in the “specialised construction activities” category (22.2% YoY vs. 14.7%) and stabilisation of growth in the “construction of buildings” category (38.7% vs. 39.0%). Quick growth in the third segment is one more signal of recovery in private investments next to the industrial production data published last Friday (see MACROpulse of 18/03/2022). We expect the recovery in the construction sector to continue in the months to come, though a strong increase in the prices of construction materials, an increase in interest rates, and the outflow of Ukrainian employees (drop of labour supply in the construction sector) will be significant downside risk factors for production. Business sentiment survey results for the enterprises for March, which will be published tomorrow by the GUS, will give us more information about the outlook for the construction and assembly production.
Solid GDP growth in Q1 2022
Today’s data on retail sales and construction and assembly production combined with last week’s data on labour market and industrial production in February support our forecast, in which the Polish GDP in Q1 2022 will increase by 6.1% YoY in Q1 2022 vs. 7.3% in Q4 2021.
In our opinion, the data on retail sales and construction-assembly production are neutral for the PLN and the yields on Polish bonds.