Poland: Weaker retail sales and construction in May

Retail sales in Poland decelerated in May from 11.9% to 5.6%YoY at constant prices, below the consensus (6.9%). The growth structure suggests no lasting slowdown; lower results were visible in the sales of fuel, clothing and miscellaneous goods. At the same time, cars and durable goods sales continued an upward trend. We expect re-acceleration of dynamics in June given record consumer confidence and spending related to the government social project – an additional lump sum for retirees paid in May.

Simultaneously, constriction dynamics decelerated from 17.4% to 9.6%YoY, also below market expectations (14%). Growth relied solely on infrastructural projects, while the construction of buildings was nearly flat (0.9%). We expect a similar picture in the coming months – the growth of issued dwelling permits has been depressed since the beginning of the year. The number of construction initiations is also decelerating.

After today’s data, we still expect relatively solid GDP growth in 2Q and forecast an acceleration from 4.7% to 5%YoY, thanks largely to increased consumer spending. We forecast private consumption to grow from 3.9% to approximately 4.5%. On the other hand, weaker results from the construction sector confirm a deceleration of investments and we expect those dynamics to decline from 12.6 to 8.5%YoY.