Polish retail sales dynamics in June slowed down to 6.4%y/y from 7.7%y/y in May, below consensus at 9.0%y/y and our forecast at 9.3%y/y. The unemployment rate fell to 12.4% from 12.6% in the previous month, worse than consensus at 12.2% and our forecast at 12.3%.
Our view: Retail sales in June turned out below consensus and our forecast. We expected retail sales to be supported by spending related to Euro 2012 football championships, which was the case, but the scale of this support turned out only moderately positive. Euro 2012 led to acceleration of food and beverages sales (7.6%y/y in June from 5.8%y/y in May), as well as higher RTV and household appliances sales, probably again supported by consumer’s purchases of TV sets (24.3%y/y from 22.5%y/y in May). Also sales dynamics of clothing and footwear were somewhat higher than last month (0.9%y/y vs. -2.5%y/y previously), possibly aided by tourists in shopping malls during match days in host cities. However, at the same time, June brought a significant slowdown in two categories: fuels sales and motor vehicles sales. This was despite higher inflation in June in transportation and in fuels, which supports higher sales as they are reported in nominal terms (e.g. fuel prices rose by 13.1%y/y in June vs. 12.7%y/y in May). Summing up, the positive Euro 2012 effect turned out insufficient to drive total retail sales figure acceleration, which confirms that the stagnant labor market situation is taking its toll on consumption. In the upcoming months, without the support of Euro 2012, we expect retail sales slowdown.
The unemployment data released today also proved worse than consensus and our expectations. The monthly drop in unemployment rate in June, related to favorable seasonal factors, was only 0.2pp compared to 0.5pp seen last year, reflecting negative effects of economic slowdown on labor market. The unemployment rate is currently as much as 0.5pp above the rate seen in analogous period last year (12.4% vs. 11.9% in June 2011). This year’s weaker unemployment rate decrease in summer months means a lower expansion of seasonal employment in agriculture, construction and tourism. It also shows the absence of a positive impact of Euro 2012 on employment. In the upcoming months we expect unemployment to stabilize around 12.3-12.4%, only to pick up in the autumn months, when cyclical factors will no longer be supportive. We expect unemployment rate to rise to above 13.0% at end-2012.
Today’s worse than expected retail sales and unemployment rate figures support the dovish members within the MPC. However, we continue to stress that there is currently little room for rate cuts with inflation at its high level above 4.0%. We continue to expect rate cuts at the beginning of 2013.