Polish retail sales grew 8.2% y/y at constant prices in May, the growth rate slowing down significantly from a gain of 19% y/y the preceding month, the statistics office GUS said on June 22.

The May reading, which came in at even below analysts’ quite conservative consensus of 8.8%, shows that consumption trends are normalising after disruption caused by the inflow of Ukrainian refugees and the low base effect from last year.

The impact of the arrival of more than 3mn refugees remains visible, as sales of food, medicines and cosmetics, as well as clothing and shoes all, expanded in double digits in May.

The following months will probably bring a further normalisation of sales results, a result of lower purchasing power of Polish consumers, offset to an extent by refugee spending, according to PKO BP.

“Consumer demand will be supported by the July cut in personal income tax rate and the likely continuation of solid nominal wage increases,” PKO BP noted.

But the harbingers of a slowdown in consumption rate are already visible in other sales segments, with just four out of eight main retail groups showing y/y turnover gains.

Sales of textiles, clothing, and shoes grew fastest, adding 17.7% y/y in the fifth month. Turnover in the pharmaceutical segment increased 15.4% y/y, while food sales grew 10.5% y/y.

Elsewhere, fuel sales fell 0.3% y/y, an effect of recent sharp price increases at the pump. Sales of furniture, audio and video equipment and domestic appliances declined 4% y/y. 

Car and car parts sales slid 10.6% y/y in the wake of manufacturers’ problems with supply chains.

At current prices, retail turnover expanded 23.6% y/y (+33.4% in April) and 0.4% m/m in May. 

At constant prices, sales slid an unadjusted 1.7% m/m, GUS data also showed. Turnover added 0.6% m/m following seasonal adjustment. 

Retail sales and other high-frequency data from the economy do not change the outlook for interest rates in Poland. The National Bank of Poland (NBP) is virtually certain to deliver yet another hike in July to raise the rate level to 6.5% at least.

More tightening is certain in the coming months, as inflation is expected to persist in double digits, peaking at 15% - 16% over the summer. The target level of interest rates is now seen at 7% - 8%, analysts say.