Restructuring processes in Polish manufacturing sector accelerate

Retail sales figures below expectations

In accordance with the GUS data published today, nominal retail sales dynamics reported by businesses having more than 9 employees decreased to 6.0% YoY in March comparing to 6.7% in February, running below market consensus (7.6%) and our forecast (7.3%). The growth of retail sales expressed in constant prices did not change between February and March, and remained at 6.1%, which was below the market consensus (6.7%) and our forecast (6.8%). The statistical effect of an unfavourable difference in the number of business days (in March 2024, there were 2 business days less than in March 2023, while in February 2024, there was one business day more comparing to the same month of 2023) was a significant factor slowing the retail sales growth between February and March. Nonetheless, the fact that the real retail sales figures did not change between February and March is somewhat surprising given a statistical effect of Easter holidays (March in 2024 and April in 2023), with Easter date this year being conducive to increased expenses in March. Seasonally-adjusted retail sales in constant prices decreased by 0.2% MoM in March.

Retail sales supported by warm March weather and Easter shopping

March saw real retail sales figures go down in most categories. Real retail sales growth took place only in the “food, beverage and tobacco” (6.6% YoY in March vs. 1.3% in February) and “textiles, clothing and footwear” (-15.2% vs. -21.5%) categories. In the former category, sales growth was driven up by the effect of the earlier Easter date as mentioned above, which was conducive to higher spending on food in March. The quicker sales growth in the “textiles, clothing and footwear” category, in turn, was largely driven up by the exceptionally warm weather in March, which made consumers purchase clothing items from spring collections earlier than usually. Although the real retail sales growth slowed down in most categories, its so-called core indicators, including in particular sales figures excluding foods and fuels, are indicative of the continuing, gradual recovery in consumer demand. Our conclusion is consistent with the results of a consumer confidence survey published by the GUS. In April, the consumer confidence indicator regarding current major purchases went up comparing to March and reached its highest level since September 2021. The future major purchases indicator went up as well, and it is close to pre-Covid levels now, having reached the highest level since March 2020.

Households cautious about increasing their consumption expenditures

Today’s data on retail sales in March combined with yesterday’s data on employment and average wages in the Polish enterprise sector (see MACROpulse of 22/04/2024) suggests that households are cautious about increasing consumption even though the purchasing power has increased over the last couple of months. This may be indicative of their efforts to restore their savings buffer, which shrank in the past quarters. Therefore, the data carries a slight downside risk to our forecast of a significant consumption growth in Q1 2024 (3.0% YoY vs. -0.1% in Q4). However, we are still of the opinion that consumer demand recovery will be the main economic growth driver in both Q1 and the entire 2024. We believe that today’s data on retail sales in Poland is neutral for the PLN and yields on Polish bonds.