Polish Sales Still Weak; Infrastructure Investment Surprises On The Upside

A shift in demand towards services and higher prices are likely dragging on retail sales. But infrastructure investment should continue to grow after the planned amendment of the budget.

In August, retail sales increased by 5.4% year-on-year in real terms. This was only slightly better than the relatively weak outcome in July (+3.9%) and a tad worse than the consensus forecast (5.7%). Sales of fuel and food were lower in August than last year, probably reflecting strong price increases in these categories. Sales of clothing accelerated to 28.6% YoY from 15.8% in July, newspapers to 7.9% from 2.6%, and other items to 12.5% from 3.5%.

After seasonal adjustments, the volume of sales grew by just 0.4% month-on-month in August. This is a weak result, particularly after a 1.5% drop in July. While sales levels have remained above pre-pandemic levels since May, momentum is clearly slowing.

Retail Sales, Volume, February2020=100

CSO 

In our view, the recent weakness of retail sales is largely the result of a shift in consumer demand towards services which became available after the loosening of restrictions. This demand for services likely strengthened during the summer but is not included in sales data published by the CSO. Consumer demand in Poland remains strong. It accelerated sharply in 2Q21, and there is no reason for it to slow given the fast wage growth and low unemployment. What's more, tax changes introduced by the Polish Deal should boost it even further next year, at the expense of a lower savings rate of households.

There is no doubt that high inflation is also affecting the volume of sales. In nominal terms, sales rose 10.7% YoY, but nearly half of that was due to price increases.

Infrastructure investment rebounded in August

Construction and assembly output came as a positive surprise. After a rather weak July (+3.3%), in August it grew by 10.2% YoY, while the consensus indicated 7.5%. 

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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