In Poland, which is expected to see the sharpest wage gains in the region this year, consumers’ spending was off to a mixed start in January after the gross savings rate dipped into negative territory in four quarters since the start of 2022. While a jump in vehicle and car part sales and housing renovations lifted headline retail sales data above forecasts, Reuters reported it was a “hopeless month” for clothing, while other durable goods sales also fell: of the 7-8% real increase in income, people spent approximately half.

Data showed how a steady improvement in consumer sentiment since late 2022 stalled in February amid renewed concerns about the economic prospects. The European Commission’s latest forecasts projected 2.7% growth for Poland, below Warsaw’s estimate of 3% or more.

Real retail sales rose by 3.0% year-on-year in January, after falling by 2.3% YoY last December. The performance was supported by strong real wage growth amid falling inflation. The largest increases in real terms were recorded in the sales of automobiles (+22.0% YoY), other sales (+18.9% YoY), and fuel (+13.1% YoY).

The deepest decline took place in textiles, clothing, and footwear (-24.7% YoY), which was due to the relatively high January 2023 reference base, weather conditions, and the general tendency to cut unnecessary spending. There was also a deep decline in sales of furniture, consumer electronics, and household appliances (-16.8% YoY). For the ninth month in a row, ING saw slightly negative annual dynamics for purchases of food, beverages, and tobacco (-0.6% YoY).

Retail sales data brings some comfort after a disappointing outcome for industrial and construction production in January. However, the 8.6% YoY increase in real wages in the enterprise sector was accompanied by an increase in real sales of just 3.0% YoY. This means that households remain cautious when making purchasing decisions.

ING baseline scenario assumes a continuation of the recovery in real disposable income and a deceleration in investment growth. The increase in the minimum wage has sustained the upward pressure on average wages. This factor, combined with wage hikes in public sectors and the high indexation of social benefits, will drive household income up.

Nominal disposable income growth, estimated to exceed 10% in 2024, in a supposedly lower inflation environment, should leave enough room for both savings to recover and consumption to grow. ING therefore maintains the forecast for GDP growth in 2024 at 3.0%. As long as people buy it.