Retail sales are making up for the losses

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 decreased in current prices by 8.6% YoY in May vs. a 22.6% decrease in April, running significantly above the market consensus (-12.9%) and our forecast (-18.5%). The sales dynamics in constant prices increased to -7.7% YoY in May vs. -22.9% in April. The main reason for the sharp increase in retail sales in May was the gradual lifting of restrictions imposed in March and April to contain the spread of the COVID-19 epidemic. This effect was especially visible in the categories that were affected the most by the closing of shopping malls, such as “textiles, clothing, footwear” (increase in sales in constant prices from -63.4% YoY in April to -8.2% in May), “furniture, audio-video and household equipment” (increase from -16.9% to 14.4%), and “other sales in specialized stores” (from -28.2% to 0.8%). A significant increase in consumers’ mobility in May compared to April has limited the decrease in retail sales of “motor vehicles, motorcycles and parts” (-54.4% YoY in April vs. -34.0% in May) and “solid, liquid, and gaseous fuels” (-32.9% vs. -17.9%). Despite a marked increase, the annual dynamics of sales in the category “food, beverages and tobacco products” have remained visibly negative (-14.9% in April vs. -7.6% in May), in our view largely due to the effect of the consumption of stocks accumulated in previous weeks as well as consumers’ making bigger use of supermarkets after the reopening of shopping malls.

Postponed demand important for the sales dynamics

In our view, the marked slowdown of the decrease in sales in May resulted also from postponed demand for certain goods. This demand was temporarily limited as a result of the imposed restrictions. This effect was especially visible in the data on the sales of “furniture, audio-video and household equipment” whose annual dynamics in May were the highest since July 2019, thus standing at a level significantly higher from the dynamics recorded in the months before the restrictions were introduced. In our opinion, the postponed demand effect can also, though to a smaller extent, be observed for “motor vehicles, motorcycles and parts” (increase in sales by 46.8% MoM in May) and “sales in other specialized stores” (39.9% MoM). A significant impact of postponed demand on the May sales is also signaled by the GUS survey results published today for retail sales. They indicate that the decrease in orders placed by customers in June has deepened compared to May, which suggests that postponed demand effects in June will not be significant.

The sentiment in retail sales continues to be weak

Despite the expected by us postponed demand effect, we expect that the gradual dying out of concerns related to the epidemic, conducive to increasing consumers’ mobility and their propensity to consume, will contribute towards further significant increase in the annual sales dynamics in June. This scenario is supported by data on BLIK and payment card payments made by CA BP customers in the first half of June (see MACROmap of 22/6/2020) and by further improvement recorded in consumer sentiment in June. However, it should be emphasized that the synthetic leading sentiment indicator calculated by GUS stood in June at a level close to the average for 2014, namely for the period which recorded double-digit unemployment. In addition, the results of the June survey released today by GUS point to a strong improvement in the sentiment indicator for the “retail sales” category in June (-25.4 pts vs. -39.4 pts in May) although it continues to stay significantly below the long-term average amounting to -3.8 pts. Thus, despite the better-than-expected data on retail sales in June, we maintain our forecast of the annual consumption dynamics in Q2 (down to -15.0% YoY vs. a 1.2% increase in Q1). This scenario is additionally supported by the dynamics of corporate wages in May which was visibly lower than our forecasts (see MACROIpulse of 18/6/2020).

Today’s data on retail sales in May are slightly positive for PLN and for yields on Polish bonds.

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