Retail sales rose in May by 7.7% y/y against 5.5% y/y in April 2012, slightly above market consensus of 7.3% y/y. The unemployment rate in May fell to 12.6% from 12.9% in April, in line with market expectations.
Data published by Statistical Office suggest that retail sales in May were supported by the upcoming EURO 2012 championships. There has been a significant acceleration of sales in the category 'furniture, household appliances and electronics" (to 22.5% y/y in May from 17.1% y/y in April),
probably aided by increased sales of television equipment before the tournament. Faster sales in May than in April was also recorded in the category "food, beverages and tobacco" (5.8% y/y against 1.0% y/y). The acceleration in retail sales in May vs. April was also favored by time distribution of Easter this year, which contributed to lower sales dynamics in April (Easter was in early April, hence holiday shopping has already been made in late March). In turn, retail sales in May (sales figures are given in nominal terms) were somewhat negatively impacted by the decline in inflation to 3.6% y/y from 4.0% y/y in April. Calculated in constant prices, i.e. after adjusting for inflation, retail sales growth in May was at 4.3% y/y against 1.8% y/y in April.
The unemployment rate in May, despite a monthly decline, was higher than in the corresponding period last year (in May 2011 the rate stood at 12.4%). The decline in the unemployment rate in May is consistent with a seasonal effect, associated with more seasonal works available, but at this time of year such a decline should be considered only moderate. We are dealing ith stagnation in the labor market, where slowing economic growth does not allow for a greater decrease in unemployment.
May retail sales figures are in line with our forecast of private consumption dynamics in 2Q12 at around 2.0% y/y, close to 1Q12 figure. The EURO 2012 should again support the sales reading in June. However, as of July one can expect a slowdown in retail sales (and as such, a somewhat slower private consumption growth in subsequent quarters), given the stagnation in the domestic labor market and the worsening economic outlook. More significant deterioration in retail sales readings should be expected in autumn months, when seasonal effects will no longer support the decrease in the unemployment rate. Data on May retail sales are neutral in terms of the upcoming MPC decision. We continue to expect that the Council will leave interest rates unchanged until the end of the year.