POLAND: Retail Sales Continue To Grow But Slightly Slower Than Expected

Poland's retail sales missed expectations, coming in at +5.4% Y/Y versus +6.2% expected (as per the Bloomberg survey), casting doubt on the strength of the ongoing recovery in consumer demand. Real retail sales rose 5.0% Y/Y, missing the consensus forecast of +5.4%. Construction output shrank 6.5% Y/Y, which was a deeper decline than expected by analysts (-4.8%).

• ING point to calendar effects (two long weekends) and weak spending related to public investments and the real estate sector as key factors that undermined construction output in May. The launching of projects financed from the new EU budget is slow and the new programme supporting the real estate sector is being delayed, hence we may need to wait for a stronger rebound in construction until 2025. They note that retail sales stayed on the trend from 1Q2024, whilethe recovery in GDP growth this year will mostly depend on domestic demand.
• mBank note that the construction output print was notably more disapponting than retail sales data, which in their view confirms that this year's economic growth will be powered by consumer spending.
• PKO write that strong wage growth and a "close to zero" implied GDP deflator support decisions to increase spending.
• The Polish Economic Institute write that robust wage growth supports consumption, allowing Poles to both rebuild their savings and increase spending. Consumers remain wary of buying ex-auto durable goods, but this may change slightly in the coming quarters, if the results of consumer sentiment surveys are anything to go by. On the other hand, the coming months may not bring any improvement in construction, with high interest rates and a cyclical pause in the inflow of EU funds weighing on the sector.