Polish consumption growth unlikely to accelerate, investment to grow 7.8 pct

Polish private consumption recorded a strong growth of 4.8 percent year-on-year in the first quarter of 2018, underpinned by solid consumer sentiment and tight labor market conditions. But retail sales growth has been moving in a sideways trend for some time. Therefore, consumption growth is unlikely to accelerate, noted Erste Group Research in a report.

Strong growth in nominal wages is underpinning the high purchasing power of households. On an average, the nominal wages rose 6.9 percent in the first quarter of this year, as compared with 4.5 percent in the first quarter of last year. Consumption growth is expected to come in at 4.6 percent year-on-year in 2018.

The revised economic growth figure for the fourth quarter of last year indicated that investment growth at 5.4 percent year-o-year as compared with the preliminary reading of 11.3 percent year-on-year. In the first quarter of 2018, a further rebound of investment was observed, which rose by 8.1 percent year-on-year, but he rebound continues to be slightly unsatisfactory and was driven mostly by the construction sector.

Gross capital formation rose 21 percent year-on-year overall, signifying that the biggest contribution to growth came from the solid rise in inventories rather than investment. As growth of inventories is a rather volatile factor, there are risks to the downside in the quarters ahead. However, investment is likely to expand 7.8 percent year-on-year in 2018, added Erste Research Group.

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