Rapid wage growth supports recovery in consumer demand
In accordance with the GUS data published today, nominal retail sales growth reported by businesses with more than 9 employees increased to 6.7% YoY in February vs. 4.6% in January, running below market consensus (6.8%) and our forecast (7.2%). Retail sales growth at constant prices accelerated in February to 6.1% YoY, compared to 3.2% in January, running above market consensus (5.1%) and above our forecast (5.8%). In our opinion, an important factor pushing towards stronger than expected YoY acceleration in real total sales growth was the significant and higher than expected increase in the real growth of wages in the enterprise sector to the highest level since 1999 (see MACROpulse of 20/3/2024). Seasonally-adjusted retail sales at constant prices increased by 2.9% MoM in February. After excluding periods in which retail sales were strongly influenced by restrictions related to the pandemic, the MoM sales growth recorded in February 2024 was the strongest in the history of the series we have at our disposal (since 2018).
Recovery in demand for durable goods
What deserves particular attention in the data breakdown in retail sales is the increase in real sales growth in categories covering durable goods. Sales growth in the ‘motor vehicles, motorcycles and parts' category increased from 23.3% YoY in January to 26.6% in February. After excluding data strongly influenced by the first wave of the pandemic in 2020, February's sales growth in this category was the highest since December 2013. On the other hand, in the ‘furniture, consumer electronics and household appliances’ category, sales growth accelerated in February to -5.2% YoY vs. -16.8% in January (which was largely due to the effect of last year's low base), reaching the highest level since January 2023. This data dovetails with the ongoing improvement in consumer sentiment. In February, the consumer sentiment index for 'making important purchases today' increased compared to January and was at its highest level since October 2021. The index relating to 'future making of important purchases' also increased, and – as in January – was the highest since March 2020.
The recovery in consumer demand is broad-based
What also indicates a recovery in consumer demand are the measures we calculate for so-called core sales, in particular sales excluding motor vehicles, motorbikes and parts, furniture, white goods and household appliances. They show a clear increase in annual sales growth in February compared to January 2024. This data signals a broad-based recovery in consumer demand, supported by a rapid decline in inflation, continued strong enterprise wage growth, the valorisation of the 500+ programme to 800+ as well as the expected public sector pay rises and the accompanying smoothing of household consumption over time. Today's retail sales data for February indicates upside risks to our forecast of a significant increase in consumption growth in Q1 2024 (3.0% YoY vs. -0.1% in Q4). At the same time, these figures are in line with our scenario in which a recovery in consumer demand will be the main driver of economic growth in Q1 and throughout 2024.
Revival of the construction industry
In accordance with the data published by the GUS, construction and assembly production increased to -4.9% YoY in February vs. a -6.1% in July, running clearly below market consensus (-2.0%) and our forecast (-3.0%). Construction and assembly production growth between January and February was largely driven up by the statistical effect of a favourable difference in the number of working days (in February 2024, there was one day more than in February 2024, while in January 2024 the number of days was the same as last year). Production growth between January and February was driven up by faster growth in the ‘civil engineering works’ (-7.8% YoY in February vs. -10.5% in January) and ‘construction of buildings’ (-0.3% vs. -7.3% YoY) categories. The decline in growth rate in the 'specialised construction works' category (-7.2% YoY vs. 0.5%) had the opposite impact. This structure of production growth confirms that demand in the construction industry is currently strongly constrained by the reduced absorption of EU funds (see MACROmap of 18/3/2024). On the other hand, the revival of housing construction, supported by the effects of the 2% Safe Credit programme, is a factor that is boosting production. The result of these trends was a marked increase in construction and assembly production recorded in February, net of seasonal factors (2.0% compared with January), further supported by a low base effect related to the adverse weather conditions in January (low temperatures combined with heavy snowfall). In the following months, we expect the gradual recovery in construction to continue, supported by an increase in residential construction activity, the upcoming local government elections and the implementation of NRP projects.
In our opinion, today’s data is slightly positive for the PLN and yields on Polish bonds.
