Retail sales data well below expectations
According to the GUS data published today, nominal retail sales reported by enterprises employing more than 9 people went up by 5.0% YoY in July comparing to a 4.7% growth in June, which is well below the market consensus (6.3%) and our forecast (6.0%). The growth rate of retail sales at constant prices did not change between July and June, remaining at 4.4%, which was below the market consensus (5.6%) and our forecast (5.5%). Seasonally-adjusted retail sales at constant prices decreased by 2.7% MoM in July. Although a decline was observed in July, it remains in a mild upward trend, suggesting a continued moderate recovery in consumer demand.
Is the recovery in consumer demand losing momentum?
The real growth rate of retail sales increased across most categories, a trend largely driven by the statistical effect of a favourable difference in the number of working days (in June 2024, there was one working day fewer than in 2023, while in July 2024, there were two working days more than in July 2023). We estimate that core sales, i.e. sales excluding motor vehicles, fuels, and food products sold in specialized stores, grew at a rate of 2.7% YoY in July, down from 3.7% in June, reaching the lowest value since January 2024. In this context, the consumer sentiment surveys published today by the GUS are particularly noteworthy as they indicate a further decline in the current consumer confidence index. At the same time, despite the increase recorded in August, the leading consumer confidence index remains in a clear downward trend since the beginning of this year. The deteriorating perception of the current economic situation and the economic outlook is also reflected in the “current major purchases” indicator, which reached its lowest value since January of this year. Today’s retail sales data, combined with the consumer sentiment survey results, are consistent with our scenario of a gradual slowdown in consumption growth in the coming quarters.
Construction and assembly production remains in clear downward trend
Construction and assembly production growth increased to -1.4% YoY in July, up from a -8.9% growth in June, running below the market consensus (-2.1%) but above our forecast (-3.0%). Seasonally-adjusted construction and assembly production expanded by 0.6% MoM in July. Despite this increase, it remains in a clear downward trend. Construction and assembly production growth between June and August was driven up by the statistical effect of a favourable difference in the number of business days (see above). As a result, the annual growth rate of construction and assembly production increased across all three reported categories: “construction of buildings” (-8.3% YoY in July vs. -17.9% in June) and “specialised construction activities” (3.7% vs. -11.8%) and “civil engineering works” (0.8% vs. -0.9%).
Construction activity held back by reduced EU fund absorption
We maintain our assessment that demand in the construction industry continues to be strongly limited by lower absorption of EU funds. The situation in housing construction is gradually improving, which is reflected in an upward trend in the number of homes in construction and housing starts. We expect housing construction to continue to support construction activity in the coming months, which will be further reinforced by projects under the National Recovery Plan. However, the scale of recovery may be smaller than expected earlier, due in part to the government’s postponement of its new borrower support programme to 2025.
Limited economic recovery scenario increasingly likely
Lower-than-expected production figures in July, combined with the industrial production data released yesterday, reduce the upside risk to our 2024 economic growth forecast (2.3% YoY) related to the publication of a higher-than-expected flash GDP estimate for Q2 (see MACROpulse of 14/08/2024). At the same time, we believe that the overall tone of today’s data from the Polish economy is slightly negative for the PLN and the yield on Polish bonds.
