June retail sales disappointed, but the outlook for consumption remains positive
The monthly data package from Poland's real economy was complemented by a weak retail sales reading. June's 2.2% year-on-year increase was a disappointing result, significantly below market expectations (4.1% yoy). GDP growth in the second quarter doesn't look to exceed 3.5% yoy. However, the outlook for consumption remains moderately positive.
The full June data package from the Polish real economy was already published. After weak industrial production and decent construction activity, we have received a disappointing retail sales reading, which in real terms rose by 2.2% yoy in June, compared to a 4.4% increase in the previous month. This is a disappointing growth, as expectations were much higher – market consensus called for increase of over 4%, driven by a low base effect in several categories (food, clothing and footwear sales) and continued high sales growth in durable goods.
Meanwhile, virtually all sales categories, except for clothing and pharmaceuticals, disappointed in June. Car sales slowed significantly, and durable goods sales generally disappointed. However, there's no need to be too pessimistic, as sales of these categories continued to show strong growth (car sales in June +7.7% yoy; furniture, consumer electronics and household appliances 10.2% yoy). It's worth remembering that durable goods sales has literally been through years of drought – it reached its peak in the spring of 2021, and from then until early 2024, its real sales value declined. Therefore, the potential for catching up is substantial.
Retail sales of goods by product category (3-month moving average)
Source: Statistics Poland, Pekao Research
However, the outlook remains moderately positive – we expect a gradual rebound of consumption with improved consumer sentiment, accelerating real wage growth, stabilizing savings and a decline in NBP interest rates in the coming quarters. Household purchasing power will increase further starting in July (real wage growth will jump closer to 6% from the current 4.5%), which will translate into a recovery in retail sales and private consumption in the second half of the year. We continue to expect private consumption to grow by approximately 3% this year, similar to 2024. The difference lies in the ratio of consumption growth to current income – the period of extraordinary savings has simply ended.
Retail sales and private consumption (% yoy)
Source: Statistics Poland, Pekao Research
With all the data from the real economy for the entire quarter now available, we see that Poland’s GDP growth in Q2 is not expected to exceed 3.5% yoy. This still represents a slight acceleration compared to Q1 (3.2% yoy). Moreover, we still estimate that consumption growth in Q2 was stronger than in Q1.
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