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Increasingly evident recovery of consumer demand

Retail sales data surpasses expectations

According to GUS data released today, nominal retail sales reported by businesses with more than 9 employees increased by 4.6% YoY in January, up from 0.5% in December, surpassing the market consensus of 3.5% and our forecast of 3.6%. Retail sales in constant prices rose to 3.0% YoY in January from -2.3% in December, significantly exceeding the market consensus (1.4%) and our forecast (1.0%). In our opinion, a key factor contributing to the increased real growth of total sales in annual terms was the strong and higher-than-expected increase in the real wage growth in the corporate sector to the highest level since August 2007 (see MACROpulse of 20/02/2024). Adjusted for seasonal factors, retail sales in constant prices expanded by 0.4% MoM in January, marking the first rise since October 2023.

Demand for cars rising rapidly

Within the retail sales structure, it is worth noting the significant increase in the real growth of sales in the "motor vehicles, motorcycles, parts" category, rising from 10.2% YoY in December 2023 to 22.0% in January 2024. Excluding the data from March to May 2021, which was strongly affected by the low base effect from the first pandemic wave in 2020, sales growth in January for this category was the highest since November 2015. This aligns with the ongoing improvement in consumer sentiment. In January, the consumer confidence index related to "current significant purchases" improved significantly compared to December. The index for "future significant purchases" reached its highest level since March 2020. Additionally, in January, the percentage of households considering the purchase of a car very or somewhat likely in the next twelve months reached its highest level since January 2020, before the COVID-19 pandemic outbreak.

Strong decline in sales of furniture, electronic goods, and household appliances

In our opinion, last year's high base was a limiting factor on the growth rate of sales in the "furniture, electronic goods, and household appliances" category. Sales plummeted by 16.8% YoY in January, compared to a 11.0% drop in December, reaching a record low in the history of our data series, after excluding April 2020 (the period of the first pandemic wave). The relatively low number of apartments released is expected to continue hindering demand in this category (see MACROmap of 22/01/2024).

Increasingly evident recovery of consumer demand

Our measures of core sales, particularly sales excluding motor vehicles, motorcycles and parts; furniture, electronic goods and household appliances; fuels; and food, show a significant improvement in annual sales growth in January compared to December 2023. These numbers signal a recovery in consumer demand, supported by a rapid decrease in inflation, sustained strong wage growth in enterprises, the hike of the 500+ programme from PLN 500 to PLN 800, and expected wage increases in the public sector and related effect of consumption smoothing. The robust sales growth in these categories highlights a solid foundation for the recovery of consumer demand and reinforces our forecast for a substantial increase in consumption growth in Q1 2024 (2.0% YoY vs. -0.1% in Q4). We anticipate that the improvement in consumer demand will be the main driver of economic growth in Q1 and throughout 2024.

Narrowing margin for interest rate cuts

The better-than-expected growth in retail sales, coupled with the significant wage increase in January, suggests an upside risk to our NBP interest rate forecast, which predicts a 50bp reduction in 2024. Another notable risk to our NBP rate forecast is the increasing possibility of the ruling coalition initiating proceedings to bring the NBP President before the State Tribunal by the end of March, as indicated by recent remarks from the chairman of the parliamentary Public Finance Committee. We will discuss the outlook for Poland's interest rates further in Monday's MACROmap.

In our opinion, today's data is slightly positive for the PLN exchange rate and yields on Polish bonds.