Polish retail sales fell 0.3% year-on-year in constant prices in September (chart), easing their fall by 2.4pp compared to the preceding month, the statistics office GUS said on October 20.

The reading provided a positive surprise, as the consensus assumed a contraction of 1.7%. The smaller-than-expected contraction offers a strong hint that the recession in the retail sector - driven by inflation eating into Poles’ real incomes and the high cost of mortgage repayments due to high interest rates – might be coming to an end.

“September retail sales were significantly influenced by one-off or atypical factors like low prices in the case of strong fuel sales and a warm September for weak sales of textiles,” Santander Bank Polska said in a comment on the GUS figures.

“[Still,] the rebound in retail sales supports our expectations for improving private consumption in the second half of 2023. In our view, the annual growth rate of retail sales will return to positive territory in October,” the Spanish bank said.

Consumer spending has long been a key driver of Poland’s economic growth. The overall picture – supported by other high-frequency data published this week – continues to point to Poland’s economic growth at around 1% in 2023. A more pronounced growth is expected in 2024.

Three of eight main retail segments managed an annual expansion in September, GUS showed in the breakdown of the data.

Sales of cars and car parts grew 9.8% y/y in the ninth month, picking up after a gain of 3.4% y/y the preceding month.

Fuel sales returned to growth, adding 7.5% y/y (-3.5% y/y the preceding month) in September while in the food segment, the turnover fell minimally at 0.1% y/y versus a reduction of 2.1% y/y in August. 

The turnover in the pharmaceuticals and cosmetics segment eased its decline to 0.6% y/y after falling 2.9% y/y in the eighth month.

Sales of textiles, clothing, and footwear crashed 16.3% y/y in September, following a slide of 4.9% y/y in the preceding month.

Sales of furniture, audio and video equipment, and domestic appliances dwindled 12.2% y/y in September after falling 10.6% y/y in July.

Sales contracted 0.3% month-on-month in constant prices in September after the July gain of 2.8% m/m.

In current prices, retail turnover expanded 3.6% y/y in September, adding 0.5pp in comparison to the July reading. In m/m terms there was a fall of 0.7% (+2.7% m/m the preceding month).

Retail turnover expanded 2.2% m/m in September following seasonal adjustment, versus an increase of 1.3% m/m in August.

Today's data come against the newly changed context of Poland’s monetary policy.

The National Bank of Poland delivered a combined 100bp cut to its reference interest rate in September and October in response to disinflation now visible across all main indicators – but also allegedly in the context of a general election held on October 15.

The election gave Poland’s opposition a likely shot at power, with the ruling PiS coming in first but without options to build a functioning majority in the next parliament.

Following the cut, Polish interest rates are at 5.75% now, still a longtime high. Another cut of 25bp is not out the question in November, analysts say.