A 3.0% decline in retail sales in Poland in September hints at a weakening economic outlook, ING has noted, as the bank revised its third quarter GDP growth forecast downwards.
ING lowered its GDP forecast for Poland to 2.5% in the third quarter, down from 2.8%, adding that it also sees downside risks to its 2024 economic growth forecast of 3%.
Food prices fall
According to Adam Antoniak, senior economist for ING in Poland, one of the main factors driving the decline in retail sales was a “sharp drop” in food prices, which fell by 7.6% year-on-year, while car sales were also lower.
The demand for durable goods, such as electronics and household appliances, remained weak, while fuel prices dropped by 8.4% month-on-month, aligning with seasonal trends.
Weaker consumption
“In our view, spending on services remained robust, but it was insufficient to compensate for softer demand for goods,” Antoniak commented. “The weaker consumption result in the last quarter is linked to the slowdown in the nominal wage growth rate and the rebound in inflation, which reduced the growth of real wages.
“Additionally, higher gas and electricity bills following the withdrawal of the energy shield left less money for other expenditures in household budgets. Severe floods in South-West Poland could also be partially responsible for weaker sales in September. The months ahead should show if the September sales were a one-off or the start of softer consumer demand.”
Softening in demand
As a result, downside risks to Poland’s 2024 GDP growth forecast of 3% are increasing, ING noted, with the September sales data potentially signalling a broader softening in consumer demand going forward.
“In light of today’s data, we revise our forecast for household consumption in the third quarter to 3.0%YoY from the previously expected 3.8%YoY, and consequently, our GDP growth forecast for the last quarter to 2.5%YoY from the previous 2.8%YoY,” Antoniak said. Read more here.
