August retail sales statistics showed an unexpected improvement. Despite the overwhelming inflation and a real drop in income, Polish consumers are still bravely storming store shelves.
Retail sales at current prices (i.e. in nominal terms) in August 2022 were by 21.5 percent
higher than a year earlier – informed the Central Statistical Office. This result is higher than in July (18.4%) and June (19.9%), but slightly weaker than in May (23.6%), not to mention the record-breaking April. It was then that, thanks to the low base effect, sales in nominal terms grew by 33.4% y / y.
However, this is not a statistic worth thinking about. The above results are “owed” primarily to high double-digit inflation, which boosts the results in nominal terms and records the highest values in over 25 years. Therefore, it is better to look at the sales results in real terms, i.e. taking into account the effect of price increases.
Retail sales calculated in constant prices in August were only 4.2% higher than a year ago. Such a meager increase in sales volumes turned out to be a better result than in July (2.0% y / y), but also exceeded the expectations of most economists. The market consensus made it possible to expect real growth in retail sales by 3.7% YoY. Nevertheless, the August result was still much weaker than that recorded in winter and spring.
The data presented today show that the retail sales deflator reached a new record at 16.6% per annum. In July it was 16.1%, in June 16.2%, in May 14.2%, in 12.1% in April, 11.3% in March and 8.5% in January. It is also a result higher than the CPI inflation (16.1%), which covers a wider range of goods than the retail sales statistics.
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We also remind you that the demand realized by (or for) refugees from Ukraine still contributed to higher retail sales in Poland. After February 24, approximately two million Ukrainians came to Poland. Some of them later left our country, but this still probably means about a million additional consumers increasing the demand for goods and services.-
When analyzing the changes in sales in constant prices, there is still a strong decline in car sales (by 6.8% y / y), but it was a much smaller regress than in February (when car sales fell by 15.1% y / y). Interestingly, despite slightly lower prices at distributors, the real decline in fuel sales deepened (-14.2% y / y against -13.8% in July). Furniture and radio / home appliances (by 2.8%) as well as books and newspapers (by 1.6%) were also bought less than a year ago.
The increase in sales in real terms was still recorded in the categories of basic goods, which may be related to the demand generated by newcomers from Ukraine. Sales of food, beverages and tobacco products increased by 7.4% yoy. Also, 13.7% more pharmaceuticals and cosmetics were purchased. Sales of clothing and footwear increased by 8.4%. In the “other” category, an increase of 10.9% was recorded.
Economic winter is coming
The sharp slowdown in retail sales observed in the summer months is probably only a prelude to the real decline in private consumption that awaits us in the winter. Since April, there has been a sharp slowdown in economic growth in Poland after a period of unprecedented consumption boom caused by covid fiscal and monetary stimulation both in the country and in the world.
The Polish consumer has been in a terrible mood for months and is trying to cut down on expenses. It is quite likely that this process will intensify in September after summing up holiday spending. There is also a threat of a drastic increase in heating and electricity bills, which Polish consumers will expect from January 1, to hang over retail sales like the sword of Damocles.
Were it not for the additional consumers from beyond our eastern border, we would probably already observe negative readings of retail sales calculated at constant prices. However, we can see these already in autumn. The fact that wages have stopped keeping pace with inflation is an argument in favor of a real decline in consumption. Without taking into account the extraordinary bonuses in forestry, energy and mining, we have seen a real drop in wages in Poland since June.
Very low consumer sentiment continues to argue for a further deterioration in retail sales. The CSO reported that in September there was only a slight improvement in the Current Consumer Confidence Index, while the Leading Consumer Confidence Index recorded a solid decline and was at its lowest level since May 2020. That is the month ending the period of the most draconian lockdown in Poland.