Retail sales decline slowing down In accordance with the GUS data published today, nominal retail sales dynamics reported by businesses having more than 9 employees increased to 2.1% YoY in June comparing to 1.8% in May, running in line with our forecast and below the market consensus (2.6%). Retail sales in constant prices fell by 4.7% YoY in June comparing to a 6.8% drop in May. Seasonally adjusted retail sales in constant prices rose in June by 0.6% MoM. Annual sales growth was accelerated by last year’s low base effect (June 2022 had seen a 1.8% MoM decline in seasonally-adjusted sales) and a marked increase in the real wage fund growth in June supported by a significant inflation drop (see MACROpulse of 20/07/2023). Like in May, retail sales in constant prices dropped in YoY terms across many categories in June, the drop having been seen in all categories reported by the GUS except “pharmaceutical products, beauty products, orthopaedic equipment.” However, the decline in all categories except “other sales in specialised stores” was not as fast as in May. Sales figures indicative of a turning point for consumption In our opinion, seasonally-adjusted retail sales reached a local minimum in the second quarter, and they will start growing from the third quarter onwards. The growth in retail sales combined with a recovery in the services sector will be conducive to a strong acceleration of consumption growth, from -3.5% YoY in Q2 up to 0.7% in Q3. Annual consumption growth will be supported by the easing of last year’s high base effect and the continuing, quick inflation drop combined with the acceleration of real wage fund growth. Consumption demand in the coming months will also be driven up by improving consumer sentiment. July has seen a strong rise in consumer confidence indicators regarding both current major purchases (the highest level since February 2022) and major purchases in the next 12 months (the highest level since December 2021). It indicates that the consumption demand recovery will go far and wide, and will include the durable goods. In our opinion, the June’s data on retail sales is neutral for the PLN and yields on Polish bonds.