Polish consumer not as weak as portrayed in September
Alert canceled. Retail sales in October increased by 1.3% year-on-year, exceeding market expectations. The September slump now appears to have been a one-time anomaly, with most of the losses recovered in October. However, it does not change the fact that retail sales of goods remain unimpressive, with levels stagnating for nearly three years. We maintain our forecast that GDP growth in 2024 will be close to 3.0%.
Polish consumer not as weak as portrayed in September
Retail sales (in real terms) increased in October by 1.3% yoy, above market expectations (0.8% yoy). This is good news, or rather a sense of relief, remembering the disastrous reading from September, when retail sales dropped by 3% yoy. It was one of the biggest negative surprises in the history of forecasting the retail sales data. Today, we know that it was probably a one-time artifact of unknown cause. In October, the vast majority (+5.6% mom after excluding seasonal and calendar factors) of the decline in sales from the previous month (-6.7% mom) was made up.
Retail sales level (constant prices, seasonally adjusted data, 2020 Jan = 100%)
Source: Statistics Poland, Pekao Research
Looking into the sectoral details of today's reading, the biggest positive surprise in October was car sales which has been holding strong for over a year (+24.1% yoy in October). In turn, total retail sales y-o-y growth would have been even higher if not for the high base effect from last year on fuels, caused by higher inventories being accumulated because of promotional prices at that time. Furniture, RTV and household appliance sales is still looking bad, falling by 3.6% yoy in October. Clothing and footwear sales is also still doing poorly (-12.8% yoy).
Retail sales by category (constant prices, % yoy)
Source: Statistics Poland, Pekao Research
However, today's data do not change the fact that retail sales of goods is not impressive, and its level has been stagnant for almost 3 years. Private consumption is mainly driven by sales in the services sector now. However, there is no consumption boom in Poland, and all measures of consumer spending activity show a relatively slow recovery. Combined with high real income growth, this suggests that the propensity to save remains elevated, in line with our expectations. How long will it remain elevated? Probably as long as interest rates remain high. The start of the interest rate cuts cycle in Poland is expected in the second quarter of 2025.
Retail sales - goods vs. services (constant prices, seasonally adjusted data, 2021 Jan = 100)
Source: Statistics Poland, Pekao Research
After yesterday's positive data on industrial output, today we have better-than-expected retail sales data for October. This allows us to be more optimistic about the prospects for the Polish economy. We maintain that Poland’s GDP growth in 2024 will be close to 3.0%. In the fourth quarter, it should accelerate above 3.0% yoy.
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