Retail sales dynamics keeps on going towards normal
In accordance with the GUS data published today, nominal retail sales reported by businesses having more than 9 employees went up by 13.0% YoY in June comparing to a 19.1% growth in May, running above the market consensus (11.2%) and our forecast (9.5%). Retail sales in constant prices increased by 8.6% YoY in June comparing to an increase of 13.9% in May. Just as it was the case with the industrial production (see MACROpulse of 20/07/2021), the last year’s low base effect, which was significantly weaker comparing to May, was the main reason behind a strong decline in retail sales dynamics between May and June. Seasonally-adjusted retail sales in constant prices grew by 0.8% MoM in June, and went up by 3.8% comparing to February 2020, which was the last month when the sales were not materially affected by the pandemic.
The June data shows that the annual retail sales growth is going back towards normal, being mostly driven by the wage fund growth now, with the restrictions adopted in relation to the third wave of the pandemic having been lifted (see MACROpulse of 19/07/2021). The pent-up demand has a limited impact on retail sales; it shows mainly in certain services such as accommodation, catering, tourism, recreation, or culture, which are not included in the retail sales. The weakening of the impact of the pent-up demand is also indicated by low monthly sales dynamics in those sales categories where higher expenses financed with surplus (forced) savings could be expected, namely “motor vehicles, motorcycles, parts” (an increase in nominal sales of 1.8% MoM comparing to a 2.2% growth in May) and “furniture, electronic goods and household appliances” (a drop in sales of 0.8% MoM comparing to a 30.6% growth in May). In our opinion, sales growth expressed in annual terms will be gradually slowing down from July to September, but we do not expect it to come back entirely to normal due to households’ mobility, which is much higher than the year before, and due to a lower base effect, which is related to it.
The slowdown of construction and assembly production growth comes as a surprise
In accordance with the data published by the GUS, the construction and assembly production increased by 4.4% YoY in June comparing to a 4.7% growth in May, running markedly below the market consensus (7.1%) and our forecast (10.4%). The slowdown of the annual production growth comes as a huge surprise given the last year’s low base effect (seasonally-adjusted production in June 2020 fell by 2.4% MoM) and a favourable difference in the number of business days (in May 2021, there was one business day less than in 2020, while in June 2021, the number of those days was the same as the year before). Seasonally-adjusted construction and assembly production shrank by 1.5% MoM in June. This means that in June the production fell significantly after three months of growth, and it was still much lower than in February 2020 (by 6.9%).
In our opinion, the surprising data on construction and assembly production in June should be thought of as a disruption in the growth cycle rather than a sign of reversal of positive trends in the construction sector. This assessment is supported by the number of dwellings for which permits were granted, which continues to grow quickly (12.0% YoY vs. 53.5% YoY in May, with the significant decline in growth being related to the absence of last year’s low base effect), and of the dwellings in which construction began (37.2% vs. 92.4% YoY). Furthermore, the continuing strong production growth in the units performing specialised constriction activities (18.3% YoY vs. 19.0% in May) including site preparation works is indicative of a durable growth in the construction firms’ activity. The GUS indicator showing business tendencies regarding current overall order books in the construction sector, which reached the highest value in June since March 2020 also indicates that the recovery in the construction sector is highly likely to continue.
Today’s data on retail sales and construction and assembly production in June combined with yesterday’s data on the industrial production in June are neutral for our GDP growth forecast for Q2 (12.0% YoY), the PLN, and the yields on bonds.