Sharp decline in retail sales growth in April

In accordance with the GUS data released today, retail sales in enterprises employing more than 9 people increased in current prices by 4.6% YoY in April vs. a 9.2% increase in March, running below the market consensus (8.1%) and our forecast (8.2%). The sales growth rate in constant prices amounted to 4.0%YoY in April vs. 8.8% in March. The decrease in retail sales growth resulted mainly from a sharp decline in sales in the category "food, beverages and tobacco products” (down by 10.4% YoY vs. a 13.8% YoY increase in March) and "retail sales in non-specialized stores” (down by 1.9% YoY vs. a 17.4% YoY increase in March). The significantly lower retail sales growth rate in these categories resulted mainly from the abatement of the positive effect related to the shift of Easter Holiday compared to last year. In 2018 the period of Easter shopping took place in the last two weeks of March while in 2017 it fell on the first two weeks of April.

Has trade ban limited sales growth in April?

Retail sales dynamics stood in April at a significantly lower level from our forecast. This forecast had taken into account the impact of earlier Easter on retail sales, estimated on the basis of the volatility of total retail sales and of sales in the a/m categories recorded in March and April in previous years. This suggests that trade restrictions resulting from the introduction of trade ban on certain Sundays have contributed to the deepening of the decline in sales growth. In April, trade was prohibited on four of the five Sundays, while in March only on two. The significant negative impact of the growing number of Sundays with trade ban on sales growth is also indicated by relatively sharp – compared to previous years – declines in sales in the a/m categories in April whenever March sales were boosted by Easter holiday. Due to strong fluctuations of the contribution of the a/m categories to total sales between respective months, the impact of the trade ban on sales growth is hard to estimate. Our conservative estimates show that the effect of growing number of Sundays with no trade has reduced the annual sales growth in April compared to March by 1 percentage point. We therefore believe that the increased turnovers of shops on Saturdays, Fridays, and Thursdays and higher online sales have not fully offset the negative impact of the growing number of non-trading Sundays on the April sales.

Sales remain within a strong upward trend

The three-month moving average for sales growth in constant prices remained high in April (6.8% YoY vs. 8.1% in March and 6.9% in February). The strong upward trend can also be observed for the dynamics of retail sales excluding sales in the categories "food, beverages and tobacco products” and "retail sales in non-specialized stores” (11.2% vs. 5.1% in March and 9.9% in February). The data signal that despite the trade ban, retail sales growth in the coming months will remain high.

In the next few months we expect a moderate slowdown in sales, due to the expected by us increasingly slow employment growth, which, amid limited wage pressure (see MACROmap of 21/5/2018) and temporarily higher inflation, related mainly to higher growth of fuel prices, will be conducive to a gradual slowdown of real wage fund growth. Our scenario is supported by the results of the May consumer sentiment survey released today by GUS. They indicate that the annual increase of the Leading Indicator of Consumer Confidence has sharply slowed down in May (down to 2.2 pts, the lowest since June 2016). Considering the tendencies in the labour market, any further significant improvement of consumer sentiment (which is very good anyway) is unlikely, we believe.

In our view, today's reading of the April retail sales is slightly negative for PLN and bond yields.

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