Polish Retail Trade Stalls As Consumption Remains Key Growth Driver

Polish retail sales of goods rose by 4.4% year-on-year in July (below consensus of 5.2%), the same pace as in June. However, seasonally adjusted data indicates a 2.7% month-on-month decline in sales. Sales of cars (+30.1% YoY) and fuels (+9.9% YoY) continue to grow strongly. Sales in the 'other' category (+18.0% YoY) and sales of pharmaceuticals and cosmetics (+11.2% YoY) also saw a boost.

At the same time, the scale of annual declines in textiles clothing and footwear (-10.4% YoY) and furniture, consumer Electronics and household appliances (-3.4% YoY) is slowing. Continued declines in sales of consumer durables (excluding cars) suggest that households are continuing to try to save on less urgent expenditures. The decline in food purchases also continues (-2.7% YoY in July).

July's data for industry, retail trade and construction fits into the scenario of a continued recovery in the Polish economy – although its pace is likely to be slightly lower in the third quarter of this year than our earlier expectations, despite a better-than-forecast second quarter. Industry is under pressure from weak foreign demand, but consumption continues to grow at a solid pace. The weakness seen in exports and investment is a cause for concern, and today's German and eurozone manufacturing PMIs do not suggest a recovery in external demand. Economic growth is still essentially based on one pillar, and that's consumption. We estimate that the economy is still on track to achieve GDP growth of 3% in 2024.

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