Retail sales data better than expected

In accordance with the GUS data published today, nominal retail sales reported by businesses having more than 9 employees went up to 21.5% YoY in August comparing to 18.4% in July, running above the market consensus (20.0%) and our forecast (18.2%). Retail sales in constant prices grew by 4.2% YoY in August vs. 2.0% in July. Seasonally-adjusted retail sales in constant prices increased by 1.6% MoM in August, growing for the first time after two months of falling.

Recovery in retail trade seen in many categories, but the outlook still isn’t bright

Retail sales in constant prices grew in most categories except for “fuels” and “clothing and footwear". In our opinion, the recovery in retail trade was largely driven up by favourable calendar effects (in July, the number of business days was the same as in 2021, while in August there was one more business day comparing to the preceding year). Nonetheless, it should be noted that real retail sales expressed on a year-on-year basis continued to fall in such categories as “motor vehicles, motorcycles, parts” (-6.8% in August), “furniture, electronic goods and household appliances” (-2.8%) and “other sales in specialised stores” (-1.6% YoY). This is indicative of a weaker demand on durable goods among households. Furthermore, consumer sentiment survey results are showing that the outlook for retail sales is quite pessimistic. In September 2022, GUS’s “future making of important purchases” indicator has reached its lowest since the first lockdown in the spring of 2020. Retail sales data for July and August pose a slight upside risk to our private consumption stagnation forecast for Q3 (as opposed to its increase by 5.5% in Q2).

Construction and assembly production growth above expectations

In accordance with the data published by the GUS, construction and assembly production increased by 6.1% YoY in August comparing to a 4.2% growth in July, running above the market consensus (4.3%) and our forecast (4.9%). Construction and assembly production growth between July and August was driven up by the statistical effect of a favourable difference in the number of business days mentioned above. Seasonally-adjusted construction and assembly production increased in August by 1.1% MoM.

A strong growth in the “construction of buildings” category (from 11.7% YoY in July to 25.7% in August) is particularly noteworthy when it comes to the production structure. In our opinion, it resulted from the completion of private investment projects, particularly the housing ones, which had been started in previous quarters. The growth in activity that we mentioned above is strongly contrasting with the contraction in the “civil engineering works” category of construction and assembly production (-1.6% YoY in August vs. 2.2% in July), which is connected with a limited investment activity in the public sector.

The data for August were better than expected, but even so we continue to expect the activity in the construction sector to be curbed in the coming months by the growing barriers on the supply (lack of qualified workforce and a strong increase in the prices of construction materials) and demand side (poorer availability of mortgage loans and poorer demand for apartments bought for cash in relation to the uncertainty caused by the war in Ukraine).

The risk of technical recession in Poland is falling

Today’s data on retail sales and construction and assembly production combined with yesterday’s data on industrial production (see MACROpulse of 20/09/2022) indicate that the probability of the so-called technical recession occurrence in Poland in Q2 and Q3 2022, understood as a decline in seasonally-adjusted GDP growth for at least two consecutive quarters, is falling. An aggregate growth in seasonally-adjusted activity between July and August was seen in the three segments of economy that were mentioned above, which means that seasonally-adjusted GDP most probably will not fall in Q3 2022.

In our opinion, today’s data is slightly positive for the PLN and the yields on Polish bonds.

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