Polish retail-sales growth unexpectedly decelerated in June on limited hiring and pay concerns, suggesting the slowdown of the European Union’s largest eastern economy has worsened.
Sales advanced 6.4 percent from a year earlier, compared with a 7.7 percent increase in May, the Warsaw-based Central Statistical Office said today. The median estimate of 27 economists surveyed by Bloomberg was 9 percent. Sales rose 0.2 percent from the previous month.
“The current labor-market situation, with a moderate increase in wages and a gradual decrease in employment in the corporate sector, doesn’t support higher consumer spending,” Maciej Reluga, chief economist at Bank Zachodni WBK in Warsaw, said in a note after the report. “Consequently, a further weakening of consumption demand may be expected in the following quarters.”
With the debt crisis intensifying in the euro area, where Poland sells more than half its exports, Polish employers are losing confidence in their prospects and limiting hiring. Job growth at companies with more than nine workers rose 0.1 percent from a year earlier in June, the least since April two years ago. Industrial-output growth also missed the forecast, rising 1.2 percent, compared with May’s 4.6 percent increase.
Three-month forward rate agreements, used to speculate on official borrowing costs, dropped 10 basis points in the last two days to 32 points, heading for a new low after falling to 26 points last week, data compiled by Bloomberg show. The zloty traded at 4.1817 per euro at 11:40 a.m. in Warsaw, little changed from yesterday. The government’s two-year yield fell 6 basis points to 4.27 percent.
“The market interpreted the retail-sales figures as an argument in favor of interest-rate cuts.” Reluga said. “June’s data from the real economy should moderate the Monetary Policy Council’s stance and trigger its transition to a neutral bias.”
The Narodowy Bank Polski is keeping interest rates at the highest level since 2009 for a second year, diverging from central banks worldwide as they undertake the broadest reduction in borrowing costs in three years to avert a global slump stemming from Europe’s sovereign-debt crisis. Poland raised its main rate by a quarter-point to 4.75 percent in May.
A weakening job market may sap household confidence and income already hit by inflation of about 4 percent for a second year. Individual consumption, which accounts for about 60 percent of the economy, will slow to 2.9 percent this year and to 2.1 percent in 2013, the central bank said July 9.
The bank forecasts the economy will expand 2.9 percent this year, compared with 4.3 percent last year. Still, growth is slowing faster than the bank’s latest projections and will “certainly” be less than its forecast, policy maker Andrzej Bratkowski told the central bank-operated obserwatorfinansowy.pl website last week.
“I see no reason not to submit a cut motion in September,” Bratkowski said in a July 24 interview with the Rzeczpospolita newspaper. Elzbieta Chojna-Duch, another MPC member, told reporters yesterday she would support a quarter-point rate cut.