Retail sales slowing down, construction output highest since December 2023

Slower growth in retail sales

In accordance with the data published by Statistics Poland (GUS) today, nominal retail sales growth reported by businesses having more than 9 employees slowed from 3.4% YoY in November to 2.7% in December, running markedly below market consensus (4.4%), but above our forecast (2.1%). The growth in retail sales at constant prices also slowed, from 3.1% YoY in November to 1.9% in December, printing markedly below market consensus (3.8%) and slightly above our forecast (1.5%). Seasonally-adjusted retail sales at constant prices contracted by 1.3% between November and December. This means that retail sales in December remained well below their all-time high reported last June.

Financial asset recovery curbing retail sales growth

The growth in retail sales at constant prices was hampered primarily by slower growth of real wage fund in the sector of businesses, which reached the lowest level since December 2023 (see MACROpulse of 22/01/2025). Sales growth was also curbed by the easing effect of the low base recorded in November 2023 in the “solid, liquid, and gaseous fuels” category, which slowed the growth in fuels sales from 4.1% YoY in November to 3.2% in December. As regards the data breakdown, it is worth noting that the “motor vehicles, motorcycles, parts” category continues to perform very strongly (25.1% YoY vs. 28.1% in November). We estimate that if we exclude that category from overall sales, we will see the sales growth slowing from 1.3% YoY in November to 0.2% in December, and its three-month average hitting the lowest level since January 2024. It suggests that households’ propensity to consume is still subdued, taking into consideration their efforts to rebuild their financial assets (see MACROmap of 20/01/2025). We expect the households’ consumption propensity to increase in the coming months with the aforementioned assets reaching a relatively high level, which will have a stabilising impact on the retail sales growth despite the further real wage growth slowdown that we expect to see. Our expectations are underpinned by the improvement in main consumer sentiment indicators seen in January, and bearing in mind that the “money saving” indicator went down at the same time, it can suggest that the households’ propensity to save has decreased.

Construction and assembly production at its highest since December 2023

Construction and assembly production growth accelerated to -8.0% YoY in December vs. -9.3% YoY in November, printing above the market consensus (-11.7%) and our forecast (-15.0%). The growth was largely driven up by the statistical effect of a favourable difference in the number of working days between November and December (in December 2024, there was one day more than in the previous year, while in November 2024, there were two days less than in November 2023). The opposite impact came from the effect of a high base in December 2023 that arose from the public finances sector entities’ efforts to make use of and settle, in 2023, the EU funds that were made available to them within EU’s previous Multiannual Financial Framework (2014-2020). Seasonally-adjusted construction and assembly production increased in December by 5.8% MoM, reaching the highest level since December 2023.

Annual construction and assembly production growth accelerated in two out of three main categories, namely “specialised construction activities” (-9.2% YoY in December vs. -13.0% in November) and “civil engineering works” (-0.7% vs. -3.2%), as opposed to the “construction of buildings”, where production growth rate declined from -16.0% to -20%. Particularly noteworthy is the growth in the “civil engineering works” category, which was reported despite the ultra-high December 2023 base. It suggests that the EU funds that Poland is receiving under the National Recovery Plan and Multiannual Financial Framework for 2021-2027 are beginning to boost the activity in the construction sector. That would mean that the significance of investments in the infrastructure as a factor stimulating the activity in the construction sector in 2025 would increase relative to companies’ investments and households’ housing investments, and that the construction sector is beginning to trend higher, given a major share that the first of those categories has in the volume of production sold. We are very cautious about such an interpretation of the December data, though, because business sentiment survey results for the construction sector are indicative of stagnation in surveyed companies’ expectations regarding the future output and domestic orders portfolio persisting over the last couple of months (in both cases, the expectations cover a three-month horizon). It will be possible to say more precisely whether or not we have reached a turning point in the construction sector’s business cycle when the January data on activity in that sector are released.

Slight upside risk for our Q4 GDP growth forecast

Industrial production data for December (which are worse than we forecasted; see MACROpulse of 22/01/2025) combined with the data on retail sales and construction and assembly production in December (which in turn came in better than we expected) carry a slight upside risk for our consumption and GDP growth forecast for Q4 2024 (2.5% YoY for both categories). In our view, today’s data on retail sales and construction and assembly production is slightly negative for the PLN and yields on Polish bonds.

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