On Tuesday, October 22, Poland’s Central Statistical Office (GUS) published its report on retail sales. Typically, this reading interests only a narrow group of analysts and rarely attracts public attention. It lacks the impact of leading economic indicators and is seldom seen as significant even among regional metrics. Occasionally, it’s dusted off to confirm a “broader picture.” This time, however, it was different.
Catastrophic Results
The report showed a reading of minus three percent, with analysts expecting a result five percentage points higher. This triggered a flood of comments. Media and social platforms were filled with words like “catastrophic,” “tragic,” and “crisis.” Some even declared that the Polish consumer had “died.” So, where does this bleak narrative come from? Certainly, this reading is poor and reveals dangerous trends. But setting aside emotional responses and clickbait headlines, the -3% year-over-year result is far from apocalyptic. Like the +4.4% result in July, which hardly inspired much excitement, this negative reading does not deviate greatly from past results. Throughout the first half of the year, the figures stayed above the line, higher than this current dip.
Inflation Exhausts Consumers
The concerning trend is the more prolonged and intense slowdown. The Polish consumer may not be “dead,” but is undoubtedly “ill.” Analyzing the details of the GUS report shows that the issue is neither isolated nor random. The problem spans regions and affects a wide range of sectors, suggesting more than just short-term disruptions. Inflation, it seems, is finally taking its toll. Consumers are visibly weary of living in a world of persistently rising prices, especially with concerning signs in wage growth dynamics. For nearly three years, inflation has hovered well above target, at times reaching pathological levels. The temporary dip in price increases earlier this year proved short-lived, with inflation now back around the 5% mark. This confirms the old truth: without stable currency, the gradual exhaustion of the local consumer is inevitable.
A Consumption-Driven Economy
Consumption has always been a driving force in Poland’s economy. The domestic market has been the primary engine behind GDP growth. In times when other components like investments or public spending faltered, consumption reliably pulled the economy upward. In the first two quarters, it contributed 2.7 percentage points to GDP growth. It is hard to imagine positive growth figures without this consumption boost. Early in the year, many analysts expected that incoming funds from the National Recovery Plan would offer relief to consumers. So far, however, these expectations have yet to be fulfilled.
Voting with Their Wallets
Retail sales also carry weight in monetary policy decisions. In the ongoing tension between the government and the central bank, consumers, by “voting with their wallets,” could force policymakers into action. Until recently, a large portion of the Monetary Policy Council (RPP), led by its president, openly spoke against interest rate cuts in the coming year. Recently, however, the tone has shifted, with suggestions that, following the March projections from the National Bank of Poland (NBP), discussions on easing could begin. Should the downward trend in retail sales continue in the coming months, there may be no room left for debate. December could prove pivotal. If the holiday season fails to boost consumption, it would indicate that the problem is severe, and the era of “expensive money” – high interest rates – might need a swift farewell.
Author: Krzysztof Adamczak, currency dealer at Walutomat.pl
