Retail sales significantly 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 5.3% YoY in September vs. a 6.0% increase in August, running significantly below our forecast (8.2% YoY) and the market consensus (8.0%). The sales dynamics in constant prices decreased to 4.3% in September vs. 4.4% in August. The annual retail sales decreased sharply in September despite the statistical effect in the form of a favourable difference in the number of working days (in August 2019 the number of working days was 1 day lower from 2018 while in September 2019 it was higher by 1 day than the year before) and the last year’s low base effect in the category “motor vehicles, motorcycles, parts”.
Surprisingly sharp decline in food sales.
Especially noteworthy in the structure of the September retail sales is a sharp decline in the sales of food in specialized stores. In nominal terms, the sales in this category decreased by 8.5% MoM, marking the largest decline recorded in September in the data history. The decline in constant terms was similar (8.3% MoM), pointing to a significant decrease in demand for foodstuffs in September. In effect, the annual food sales dynamics decreased in constant prices to -2.9% YoY in September vs. 1.5% in August, which was conducive to a decrease in overall retail sales by ca. 1.1 pp. In our view, the factor which could have contributed to a significant reduction of the demand for food in September was a sharp cumulative rise in prices of some foodstuffs (mainly meat and vegetables) recorded in recent quarters. This hypothesis is supported by the recorded in September significant decline in sales in non-specialized stores (down by 8.6% in nominal terms), suggesting no significant increase in sales in large stores at the expense of sales in non-specialized stores. The data on retail sales in Q4 will enable the verification of the hypothesis on the negative impact of rising food prices on its sales.
Transfers and good consumer sentiment support consumption
In September, the 6-month rolling averages for the annual real sales dynamics in the categories “furniture, radio, tv and household equipment” and “sales in non-specialized stores”, being a barometer of the strength of consumer demand, stayed at a high two-digit level (11.7% and 14.0%, respectively). A high growth rate of sales in constant prices excluding cars, fuels and foodstuffs sold in non-specialized stores (7.3% YoY vs. 7.2% in August) also suggests a strong tendency for an increase in consumer demand. Conducive to higher annual consumption dynamics (especially in services which are not covered by the monthly data on retail sales) remains the extended 500+ scheme and the continuingly good consumer sentiment, reflected by the record high households’ propensity to make “major purchases”, recorded in GUS surveys.
Consumption growth accelerated in Q3
Today’s data on retail sales do not alter our forecast assuming the acceleration of consumption growth in Q3 (4.6% YoY vs. 4.4% in Q2). At the same time, they are neutral for PLN and the prices of the Polish debt.