Polish retail sales grew 2% y/y at constant prices in July, the growth rate slowing down further from 3.2% y/y the preceding month (chart), the statistics office GUS said on August 22.
The July reading showed that even analysts’ quite pessimistic consensus of 2.3% was too bright. “Sentiment in retail is weak [due to] high inflation and interest rates, as well as the pessimistic mood among consumers,” Bank Millennium wrote in a comment.
The outlook for the retail sector is for continued weakness, analysts say.
“Falling purchasing power and worsening consumer sentiment will limit spending on goods other than necessities,” bank PKO BP said.
Indeed, sales of foodstuffs, pharmaceuticals, and textiles all grew y/y in July, certainly propped up by over one million of new consumers from Ukrainians who arrived in Poland, fleeing war. Meanwhile, turnover in durable goods and fuels declined.
Sales of textiles, clothing, and shoes grew fastest, adding 13.3% y/y in the seventh month. Turnover in the pharmaceuticals and cosmetics segment increased 10.2% y/y, while food sales grew 5.4% y/y.
Elsewhere, fuel sales slid 13.8% y/y, an effect of persisting high prices at the pump. Car and car parts sales fell 15.1% y/y. Sales of furniture, audio and video equipment and domestic appliances declined 5.3% y/y.
Sales added an unadjusted 1.2% m/m in constant prices, GUS data also showed. Turnover inched down 0.1% m/m following seasonal adjustment.
At current prices, retail turnover expanded 18.4% y/y (+19.9% in June) – an effect of high inflation – and 1.2% in m/m terms.
Retail sales and other latest high-frequency data from the economy give more substance to the outlook on interest rates policy in Poland for the remainder of the year.
The National Bank of Poland (NBP) is now expected to deliver one final hike in its reference interest rate, raising it by 25bp-50bp to 6.75%-7%.
The rate-setter will then switch to a wait-and-see mode, as nearly a year of monetary tightening and an economic slowdown are about to start pushing inflation incrementally down.
More tightening is certain in the coming months, as inflation is expected to persist in double digits, peaking at 15% - 16% over the summer. The target level of interest rates is now seen at 7% - 8%, analysts say.