Higher sales fuelled by concerns over prices? - May 2011

In February retail sales in Poland grew at their highest rate since the outbreak of the global crisis, sharply exceeding market expectations. This coincided with a substantial drop in consumer confidence. The question therefore arises, was the uptick in retail sales a reflection of improving economic conditions, or was it rather driven by consumers’ fears about a further rise in inflation?

After a period of weaker growth caused by the global crisis, in the final months of 2010 retail sales in Poland accelerated sharply. In our view, the uptick reflected several quarters of improving economic conditions (and the resulting gradual recovery on the labour market), but it was also significantly boosted by one-off factors, namely the prospect of VAT rises and other tax restrictions taking effect on 1 January 2011.