Retail sales growth accelerates
In accordance with the GUS data published today, nominal retail sales growth reported by businesses having more than 9 employees accelerated to 5.4% YoY in May comparing to 4.3% in April, running below the market consensus (5.7%) and our forecast (7.2%). The growth in retail sales in constant prices accelerated from 4.1% YoY in April to 5.0% in May, printing above the market consensus (4.9%) and below our forecast (6.5%). Sales growth acceleration was driven up by the easing effect of Easter falling on an earlier date than in the previous year, which had slowed the annualised sales growth down in April 2024. Seasonally-adjusted retail sales in constant prices increased by 3.3% MoM in May. In our opinion, such a strong increase in seasonally-adjusted retail sales in May resulted to a great extent from the difficulties related to the adjustment of data for effects of Easter purchases, which were conducive to relatively strong fluctuations in month-on-month sales growth over the last couple of months. The seasonally-adjusted retail sales growth seen in May indicates that the upward trend for sales growth seen over the last couple of quarters continues.
Lasting consumption recovery
Sales expressed in constant prices were driven up in May by the accelerating sales of foods in specialised stores, which went up from -6.8% YoY in April to -1.0% in May, driven by the easing effect of Easter purchases mentioned above. In most other categories including the “motor vehicles, motorcycles, parts” and “furniture, electronic goods and household appliances” categories, which comprise durable goods, the sales have slowed down. Nonetheless, the sales growth that we assessed, excluding motor vehicles, fuels and foods sold in specialised stores, stood at 4.1% YoY in May vs. 3.0% in April, reaching the highest level since November 2022. It indicates that the consumption demand recovery is highly likely to be lasting.
Downside risk to Q2 consumption forecast
Today’s data is indicative of a downside risk to our consumption growth forecast (5.1% YoY in Q2 vs. 4.6% in Q1). We continue to believe that consumption demand recovery, boosted by a quick growth in real wage fund (see MACROpulse of 20/06/2023) will be the main economic growth driver in both Q2 and the entire 2024, just as it was in Q1. Our conclusion is supported by consumer confidence indicators that have been continuously improving over the last couple of months, including the indicators that describe the households’ inclinations to make major purchases now and in the future.
Construction and assembly production grows for the second month running
Construction and assembly production shrank to -6.5% YoY in May comparing to -2.0% in April, printing below the market consensus (-3.8%) and our forecast (-4.5%). Industrial production growth between April and May was largely driven down by the statistical effect of an unfavourable difference in the number of working days (in April 2024, there were two days more than in the previous year, while in May 2024, there was one day less than in May 2023). Seasonally-adjusted construction-assembly production increased in May by 0.1% MoM. This means that it rose for the second month running in May.
Housing investments aid the recovery in the construction sector
Without taking seasonal factors into consideration, production growth between April and May was driven down by a strong slowdown of growth in the “civil engineering works” (-6.6% YoY in May vs. 7.8% YoY in April). An opposite impact came from the acceleration of production growth in the “construction of buildings” (-5.4% YoY vs. -5.9%) and “specialised construction activities” (-7.7% vs. -10.5%) categories. The breakdown of production growth data shows that the demand in the construction sector is still being strongly curbed by a reduced absorption of EU funds (see MACROmap of 18/03/2024), which leads to a slowdown in activity, particularly in the “civil engineering works” category. Annualised production growth acceleration in the two remaining categories, which took place despite the unfavourable calendar effects mentioned above, was most likely connected with the increasing activity in the housing construction sector reflected in the numbers of dwellings under construction and of dwellings in which construction works began, which have been growing over the last couple of months. We expect housing constructions to support the activity in the construction sector in the months to come, and the impact of that factor will be boosted by the implementation of projects under the National Recovery Plan. Our conclusion is consistent with the results of the business survey for the construction sector, which are indicative of potential production recovery in the quarters to come.
GDP growth in Q2 might accelerate only slightly
Today’s data on retail sales and construction and assembly production in May combined with last week’s data (see MACROmap of 20/06/2024) on industrial production in that month carry a significant downside risk to our forecast, in which Polish GDP in Q2 is to increase by 2.5% YoY vs. 2.0% in Q1. We believe that the overall tone of today’s data from Polish economy is slightly negative for the PLN and the yield on Polish bonds.
