Polish retail sales fell 6.8% year-on-year at constant prices in May (chart), easing their fall by 0.5pp compared to the preceding month, the statistics office GUS said on June 22.

The reading disappointed the market, which expected a decline of 5.7% y/y. The May fall meets analysts’ forecasts of the retail sector entering a protracted recession, driven by inflation eating into Poles’ real incomes and the exorbitant cost of mortgage repayments due to high interest rates.

Poles’ wallets are also thinner as money accumulated during the pandemic has largely run out by now, analysts also say. Finally, the statistical effect of the arrival of over one million war refugees from Ukraine no longer affects the figures this year.

With inflation in decline (albeit slow), there are hopes, however, that “income from work will return to real growth, which will support the rebound in sales from the current cyclical trough,” PKO BP said in a comment.

That said, analysts “still believe that consumer recession will extend … until the third quarter”, PKO BP also said.

The overall picture – supported by other high-frequency data published this week – continues to point to Poland’s economic growth at no more than 1% in 2023.

“The activity data for May suggest that the economy is still struggling to generate any momentum,” Nicholas Farr of the London-based Capital Economics said.

“We expect positive growth later this year, as the hit from Poland’s inflation shock continues to unwind. Activity may also be supported by fiscal loosening ahead of elections scheduled for autumn,” Farr added.

None of the eight main retail segments managed expansion in May, the breakdown of GUS data showed. Food sales fell 5.3% y/y versus a reduction of 8% y/y in April.

Sales of textiles, clothing and footwear declined 4.9% y/y in May, following an expansion of 0.6% y/y the preceding month.

Car and car parts sales slid 2.7% y/y (-5.1% y/y in April), while the turnover in the pharmaceuticals and cosmetics segment retreated 3.8% y/y in the fifth month after falling 2.5% y/y in April.

Fuel sales fell 11.8% y/y in May (-14.5% y/y the preceding month). Sales of furniture, audio and video equipment and domestic appliances dwindled 14.8% y/y in May after falling 14.7% y/y in April.

Sales fell an unadjusted 1% month-on-month at constant prices in May after the April gain of 0.1% m/m.

At current prices, retail turnover expanded 1.8% y/y in the fifth month (+3.4% y/y in April); in m/m terms there was a fall of 1.1% (+0.6% m/m the preceding month).

Retail turnover also contracted 1.1% m/m in May following seasonal adjustment (+1.1% m/m in April).

Today's data do not change expectations regarding monetary policy in Poland. In the coming months, the National Bank of Poland (NBP) is forecast to keep at its wait-and-see approach, tracking inflation trends as well as the overall economic situation in the country, analysts say.

As the coming months are expected to bring about declines in the annual CPI inflation rate, the NBP's interest rates will stabilise with little to no room for a cut until the end of the year, the current consensus says.