Retail sales below expectations

In accordance with the Polish Central Statistical Office's (GUS) data that have been released today, retail sales in enterprises employing more than 9 people increased in current prices by 3.1% YoY in March vs. a 6.5% increase in February, running below our forecast equal to the market consensus (3.9%). The sales dynamics in constant prices increased by 1.8% in March vs. 5.6% in February.

The shift of Easter holiday timing has limited retail sales

The deceleration of real retail sales growth resulted mainly from lower sales in the categories: "food, beverages and tobacco products” (-10.4% YoY in March vs. 1.6% in February) and "retail sales in non-specialized stores” (-1.3% YoY vs. 13.5%). The decrease in retail sales in these categories resulted from different timing of Easter holiday. In 2019 it took place in the second half of April which enabled Easter shopping in April. In 2018 it fell at the turn of March and April. Consequently, last year Easter shopping was done in the second half of March. Such shift in the timing of the holiday is conducive to lower retail sales dynamics in March 2019 and their increase in April.

Consumer demand still strong

It should be pointed out that lower growth rate of total retail sales was mainly the result of the shift of Easter shopping from March to April, while their dynamics in most categories have increased. Excluding "food, beverages and tobacco products” and "retail sales in non-specialized stores”, retail sales increased by 7.3% YoY in March vs. a 5.8% increase in February. In addition, this acceleration was recorded despite the unfavourable calendar effects. Thus, the data point to further strong consumer demand in March supported by strong labour market, record optimism of households (see MACROpulse of 17/4/2019), and the expected increase in social transfers. The strength of consumer demand is also reflected by marked acceleration in retail sales growth in the category "furniture, audio-video and household equipment” (representing durable goods) from 13.8% YoY in February to 20.5% in March.

Fast consumption growth in Q1

Retail sales in constant prices increased by 4.1% YoY in Q1 vs. a 5.8% increase in Q4 2018. Today's data pose a slight downside risk to our forecast, in which private consumption growth rate rose to 4.8% YoY in Q1 vs. 4.3% in Q4 2018.

In our view, today's reading of retail sales in March is neutral for PLN and the debt market.

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