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Euro 2012 not enough to reverse slowing retail sales growth


2012-07-27



After a marked slowdown in April and a modest uptick the following month, retail sales in Poland decelerated again in June. This came as a considerable surprise to the market, which had expected a recovery in consumer spending, helped by a lower base of comparison and by the onset of the Euro 2012 football championship.

The effect of Euro 2012 was not sufficient, however, to offset factors impacting negatively on consumption, i.e. deteriorating macroeconomic conditions, a sluggish labour market and falling real wages. Furthermore, the impact of the tournament was actually a mixed one. On the one hand, many consumers flocked to replace their TV sets to enhance the watching experience of two great sporting events scheduled in quick succession, i.e. Euro 2012 and the 2012 London Olympics. This has shown up in the sales performance of the category “furniture, radio, TV and household appliances”, which has recorded consistently high growth rates since the start of 2012. (Another factor driving sales of modern electronics devices is the upcoming switchover from analogue to digital terrestrial television broadcasting). And the arrival of hundreds of thousands of supporters boosted sales in the category of food, beverages and tobacco products (though here part of the nominal increase was due to price hikes introduced ahead of the tournament). On the other hand, live TV broadcasts of the matches kept Poles at home, limiting their buying activity. Thus for example car dealers reported sharp declines in customer traffic at showrooms in the afternoons, and indeed, sales of motor vehicles, motorcycles and parts slowed substantially in June, GUS data showed. The same factor was probably responsible for the slowdown in fuel sales.

We expect July figures to show a temporary acceleration of retail sales growth, thanks to a lower comparative base and possibly helped by some households making purchases delayed until after Euro 2012. However, we reckon that the slowdown in consumer spending will gradually deepen in the remainder of the year. In our view, until the eurozone crisis is resolved and the Polish economy returns to a high growth path, it is unlikely that labour market conditions will improve or that retail sales will return to the growth rates seen in Q1 2012.



Paweł Sionko
Construction Market Analyst, PMR

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