Persistent slowdown of consumption growth

Retail sales rebound strongly in October

In accordance with the GUS data published today, nominal retail sales growth reported by businesses having more than 9 employees accelerated to 2.3% YoY in October, from -2.2% in September, printing ahead of our forecast (1.3%) and market consensus (2.0%). The growth in retail sales in constant prices accelerated from -3.0% YoY in September to 1.3% in October, also printing above market consensus (0.8%) and our forecast (0.2%). Seasonally-adjusted retail sales in constant prices increased by 5.6% between September and October. This means that the strong rebound in October was not enough to offset the September plunge (-6.7% MoM). Consequently, retail sales in October still followed the downward trend that had begun last July. In our view, massive retail sales fluctuations observed over the last two months were mostly caused by other factors than the impact of the September flood on households’ propensity to consume. We believe the main reason behind the fluctuations were the difficulties related to the seasonal adjustment of monthly sales data. Consequently, much caution is advised when interpreting this data.

Persistent slowdown of consumption growth

In our opinion, retail sales growth in October was slowed by real wage fund growth, which had reached the lowest rate since December 2023 (see MACROpulse of 25/11/2024) and by households becoming increasingly cautious about spending due to higher inflation. Retail sales data for October confirms that the substantial slowdown of consumption growth from 4.7% YoY in Q2 to 2.1% in Q3, which we have forecasted, is lasting, and the annual consumption growth in Q4 will not surge beyond 3% (GDP growth data breakdown for Q3 is due this Thursday). Consumption in Q4 will be boosted by a relatively strong (comparing to retail sales) growth rate for the sale of services. However, consumption growth in Q4 will still be hampered by households remaining highly cautious about spending, as shown in the consumer sentiment survey. In October, the “savings” index reached the highest value in the recorded history (since 2004).

We believe that today’s data on retail sales is slightly positive for the PLN and yields on Polish bonds.