Polish retail sales grew 8.1% y/y in constant prices in February, the growth rate easing from a gain of 10.6% y/y the preceding month, statistics office GUS said on March 21.

The February reading is right on market expectations and should position Poland for a good first quarter of economic growth despite huge uncertainty brought about by Russia’s waging war on Ukraine.

“The consumption outlook for this year is favourable despite high inflation. The influx of [refugees] to Poland may potentially increase consumption dynamics, although the scale of growth is very uncertain, as the development of the situation in Ukraine is largely unpredictable,” Bank Millennium said.

On the positive side, the labour market is expected to remain favourable. The unemployment rate is to remain around just 5% throughout 2022. The influx of Ukrainian refugees will rather ease labour shortages than cause oversupply.

Overall, however, the war in Ukraine is likely to weigh on the pace of growth via hitting Poland’s trade with Russia, Capital Economics, a London-based consultancy, expects.

“Poland’s goods exports to Russia – which amount to around 3% of GDP - will be more or less lost and raw materials’ imports from Russia will be severely disrupted, hitting Polish industry,” it said.

“Higher commodity prices will feed through into higher energy and food inflation, weighing on real incomes and household spending. Overall, we have revised our 2022 GDP growth forecast from 4.5% to 3.5%, which is currently below consensus,” Capital Economics added.

Five out of eight main retail segments posted y/y turnover gains at constant prices in February, GUS showed in the breakdown of the data.

Sales of fuels jumped 22.1% y/y in February, while turnover in the pharmaceutical segment expanded 18.2% y/y. Food sales grew 6.6% y/y, while sales of textiles, clothing, and shoes increased 2.6% y/y. 

Sales of furniture, audio and video equipment, and domestic appliances slid 4.4% y/y. Car and car parts sales declined 20% y/y. The lump category of “other” recorded a huge gain of 31% y/y.

In current prices, retail turnover expanded 16.5% y/y (+20% in January) in February.

In m/m terms and in constant prices, sales added an unadjusted 1.8% and grew a 1.4% following adjustment, GUS data also showed. In current prices, there was an unadjusted gain of 0.9% m/m. 

Retail sales and other data data do not change much in the outlook for interest rates in Poland. The National Bank of Poland is all but certain to deliver the seventh hike in as many months in April to bring the reference rate up by 50bp to 4% at least. 

More tightening is virtually certain later on in the year, as the war will boost inflation on the back of more expensive commodities – which will also translate into higher food prices.