Polish consumers are back in the game
Compared to industrial or construction output there was no doubt or nuance regarding the strength of January retail sales data. This suggests that Polish consumers stopped saving excessively. There is even some scope for a positive surprise in 2025.
The biggest surprise at the beginning of the year came from the one driver of economic growth that few believed in, i.e. household consumption. Retail sales rose by 4.8% yoy in January, far surpassing our forecast (0.5% yoy) and consensus (1.7% yoy). This is the fastest retail sales growth since last May and one of the bigger positive surprises in recent years. What exactly happened in January?
Real retail sales (yoy)
Source: Statistics Poland, Macrobond, Pekao Research
Compared to our assumptions, higher growth was recorded in the following types of goods: cars and pharmaceuticals (up by about 5 pp. each), food (ca. 2 pp.), and furniture and consumer electronics (almost 15 pp. - sic!). On the other hand, "mall-type" sales (books, newspapers and other specialized stores) came in below forecasts (by 8 pp.). Overall, we do not see any clear one offs in January sales. On the contrary – the surprise occurred in several categories, and in most of them this January did not deviate from multi-year seasonal patterns. Perhaps the only exception is the sales of furniture and household appliances - in January it fell only by 17% mom compared to the typical pattern of -25-35% mom. Such a good January, however, came after the worst December in history (+7.7% mom compared to the typical increase of 15-30% mom). So why is everyone surprised? Because at the turns of 2022/23 and 2023/24, the weakness of December had smaller effects. Its return after two years of saving seems like an important signal, even if it is somewhat exaggerated.
Furniture and household appliance growth (% mom)
Source: Statistics Poland, Macrobond, Pekao Research
One swallow doesn’t make a summer, and the significance of January's surprise should not be overestimated. Nevertheless, retail sales growth and its structure, as well as quite positive signals from consumer confidence surveys, suggest that "something" is afoot. This "something" is the end of the long process of rebuilding savings. As we indicated in our earlier publications, this means that consumption growth in 2025 will be equal to real household income growth (unlike in 2024, when it was 2.5 times smaller). If consumers turned consumption smoothing on, it may even be greater. Nevertheless, the mechanism is similar here. For 2025, we assumed private consumption growth of 3% (unchanged from 2024), and even in such a scenario, the Polish economy should grow by 4% in 2025 (thanks to investments). If consumption growth turns out to be higher, reaching 4% will be even easier.
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