Retail sales data below expectations
In accordance with the GUS data published today, nominal retail sales reported by businesses having more than 9 employees shrank from 5.0% YoY in July to 3.2% YoY in August, running markedly below our forecast that was consistent with market consensus (4.2%). The growth in retail sales in constant prices slowed from 4.4% YoY in July to 2.6% in August, running markedly below market consensus (3.4%) and our forecast (3.5%). Seasonally-adjusted retail sales in constant prices in August went up by 1.9% MoM. This means that the sales are still following a mild upward trend, suggesting that there is still some moderate recovery in consumer demand.
Consumer demand recovery slows down significantly
Real retail sales growth slowed in most categories, hampered by the statistical effect of an unfavourable difference in the number of working days (in July 2024, there were two days more than in the previous year, while in August 2024, there was one day less than in August 2023). Consequently, the growth that we assessed for the so-called core sales, i.e. sales excluding motor vehicles, fuels and foods sold in specialised stores, went down from 2.7% YoY in July to 1.4% in August, and has been following the downward trend since last June.
Consumer sentiment has been following a downward trend since the beginning of the year despite some improvement taking place in September as shown by both current and leading consumer confidence indicators. Negative trends can also be seen for current and future major purchases, although they grew in September as well. Retail sales data combined with consumer sentiment survey results are therefore consistent with our scenario of a gradual decline in consumption in the quarters to come.
Statistical effects driving construction and assembly production down
Construction and assembly production shrank to -9.6% YoY in August comparing to -1.4% in July, printing below the market consensus (-7.2%) and our forecast (-8.5%). Seasonally-adjusted construction and assembly production shrank by 0.5% MoM in August, and followed a clear downward trend. Construction and assembly production growth (without seasonal adjustment) between July and August was driven down by the statistical effect of the unfavourable difference in the number of working days mentioned above. Consequently, the annual construction and assembly production growth slowed strongly in 2 out of 3 reported categories: “specialised construction activities” (-9.8% YoY in August vs. 3.7% in July) and “civil engineering works” (-10.6% vs. 0.8%). A slight acceleration was seen only in the “construction of buildings” category (-7.9% vs. -8.3%), driven by the recovery in activity in the housing construction sector observed over the last couple of months.
Housing construction sector supporting construction and assembly production
We continue to believe that housing constructions will be stimulating the activity in the construction sector in the coming months, the current activity being strongly hampered by the reduced absorption of EU funds. The impact of this factor will be increasingly boosted by projects delivered as part of the National Recovery Plan. However, the scale of the recovery may be smaller than we expected, one of the reasons being the government’s new borrower assistance scheme having been postponed until 2025.
Limited economic recovery scenario becoming increasingly probable
Today’s data on retail sales and construction and assembly production for August combined with last week’s data on industrial production, average wages and employment in the business sector (see MACROpulse of 19/09/2024) support our scenario in which economic growth in the coming quarters will be driven up primarily by consumption. At the same time, the data have a mitigating impact on the upside risk to our economic growth forecast for 2024 (2.3% YoY), which is connected with the release of higher-than-expected GDP growth figures for Q2 (see MACROpulse of 29/08/2024). We believe that the overall tone of today’s data from Polish economy is slightly negative for the PLN and the yields on Polish bonds.
