Retail Sales Undershoot Expectations Despite Easter Boost, ING Cut 1Q24 GDP Outlook

Poland's real retail sales rose 6.1% Y/Y, missing the consensus forecast of +6.9%. On a sequential basis, they were up 14.2% M/M, printing below the +15.2% consensus call. Statistics Poland noted that "enterprises classified in the group with the largest share in retail sales “total” - “food, beverages and tobacco products” noted an increase by 6.6% [Y/Y]" and by 18.2% M/M. It is worth adding that the report captured consumer behaviour from just before the 5% VAT rate on food kicked back in after its temporary suspension. While most major retail chains pledged not to pass the VAT hike on to consumers, a report by UCE Research/WSB Merito suggested that food prices rose 3.2% Y/Y during the first half of this month (i.e. through April 15).

• ING write that the nearly 10% Y/Y increase in real wages coupled with the Easter holidays failed to result in any consumer spending boom, as Poles depart from their pro-saving approach rather slowly. They think that the recovery of private consumption will thus continue at a moderate pace. Based on a moderate rebound in retail sales as well as weaker data from the industrial and construction sectors, they revise their GDP outlook for Poland to +1.5% Y/Y in 1Q24 (from +2.1%). They still expect the economy to grow by 3.0% Y/Y in 2024.
• mBank note that retail sales outturn was weaker than expected, but the scale of the surprise was smaller than in the case of industrial output. They do not think that the latest print changes much for the outlook, with consumption still expected to recover on the back of rising real income.
  
• Pekao interpret this retail sales print as disappointing, given that it was boosted by the Easter shopping spree, which had a strong positive impact on food sales. They note that the pace of economic rebound has been "sluggish" so far and the latest data support expectations of 1Q24 GDP growth coming in comfortably below +2.0% Y/Y.
  
• PKO write that retail sales "must be growing" given that real wages increased by nearly 10% Y/Y in March, even as the latest outturn was weaker than expected. They note that food sales accelerated markedly, pointing to the impact of the "Easter effect."
  
• The Polish Economic Institute write that fast real wage growth remains the main engine of consumption. With real wages growing 9.8% Y/Y in March, Poles can afford to increase both spending and savings. The Institute expect solid improvement in retail sales to continue for at least the next two years.