Retail sales in March markedly 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 decreased in current prices by 7.1% YoY in March vs. a 9.6% increase in February, running significantly below our forecast (6.0%) and the market consensus (-3.4%). The sales dynamics in constant prices decreased to -9.0% in March vs. 7.3% in February. The significant error of our forecast resulted from the overestimation of the scale of stockpiling by households and underestimation of the negative impact of households’ fears on the purchase decisions in the second half of March.

Retail sales plunged due to COVID-19 epidemic

The main factor behind the retail sales decline in March was the closing of schools and shopping malls in mid-March as part of the restrictions imposed by the government with a view to containing the spread of the COVID-19 epidemic. These measures were reflected by the collapse of sales in most categories. The biggest declines in year-on-year sales were recorded in “textiles, clothing, footwear” (-48.6%), “motor vehicles, motorcycles and parts” (-30.9%), “other sales in specialized stores” (-21.4%), and “furniture, audio-video and household equipment” (-16.7%).

The decline in retail sales was limited by the stockpiling by households and by bigger demand for cleaning agents, medicines, etc. This was reflected by higher sales in the categories “food, beverages, and tobacco products” (up by 2.5% YoY) and “pharmaceuticals, cosmetics, orthopedic equipment” (8.8% YoY). A considerable part of the stockpiling took place in large-surface stores, but GUS has stopped publishing data for this distribution channel this year (the category “non-specialized stores”). The aforementioned factors supporting retail sales were no longer present in April which will deepen the rate of their decline most likely to a double-digit level.

The situation in trade is not that bad

We believe that today’s data may overestimate the scale of the collapse in retail trade in March as GUS is not taking into account the sales in companies employing less than 10 people (e.g. corner shops or some online stores). They are the sales channels which most likely attracted more customers amid the epidemic, which means that the actual decline in retail trade turnovers was most probably lower from that reported by GUS.

Consumption will decrease sharper that retail sales

We should bear in mind that the data on retail sales do not present all the expenditures of households (i.e. consumption) and only expenditures on goods. To correctly assess the tendencies of changes in private consumption we should take into account also the expenditures on services. The results of the GUS surveys point to a marked deterioration of the general sentiment in the service branches in April (i.a. “accommodation and catering”). In addition, payment card transactions point to a much bigger (compared with goods) decline in the expenditures of individual customers on services in March and April 2020. This is consistent with lower mobility of households and limited supply of many services, due to the government measures aimed at combating the epidemic. We therefore maintain our forecast of the annual consumption dynamics (down to -20.0% YoY in Q2 from 0.0% in Q1). In the next MACROmap we will present an analysis of data on payment card transactions at greater length.

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

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