Consumers still willing to spend, but saving remains a priority

This article is a part of Poland Unpacked. Weekly intelligence for decision-makers

Retail sales at constant prices rose by 3.9% year on year in July, according to data from Statistics Poland (GUS). That is a solid result, broadly in line with the pace of growth recorded across the year so far. From January through July, retail sales increased by 3.7% year on year. The data show that consumers remain a strong pillar of the economy.

The strongest growth in July was recorded in pharmaceuticals, cosmetics and orthopedic equipment, where sales rose by 10.8% year on year. The second-fastest-growing category was other goods, where demand increased by 9.2%. Demand also remains strong for home furnishings and for motor vehicles, motorcycles and parts. Sales in these categories rose by 8.8% and 8.1% year on year, respectively, in July. These are categories where sales values have been rising for many months.

Interestingly, weak demand is evident in clothing and footwear. Retail sales in this category fell by 1.7% year on year in July. Over the first seven months of the year, meanwhile, sales increased by a marginal 0.2% year on year.

XYZ perspective

The increase in sales of durable goods, such as cars and home furnishings, shows that consumers are not shying away from major purchases. Similar conclusions can be drawn from consumer sentiment surveys conducted by Statistics Poland (GUS). The net share of households – the percentage of positive responses minus negative responses – that say now is a good time to make major purchases is at its highest level in recent years.

What is driving this? Above all, households’ strong capacity to save. This is visible in the chart: the net shares reported for questions about major purchases and the ability to save move closely together.

In other words, nominal wage growth well above inflation over the past three years, since mid-2023, has created considerable room for savings in household budgets. Some of those savings subsequently find their way into the economy in the form of spending on durable goods.

What comes next? Households say saving is their priority. And the key point is not even the net share itself, but the gap between households planning to save in the future and those planning to make major purchases. In August, the net share of households planning to save stood at 14%, while the net share planning to make major purchases was nearly -28%. That is a gap of almost 42 percentage points – the widest since 2018. The chart shows that these two lines began to diverge in 2024.

Even so, we have seen a revival in demand for durable goods this year and last. How can this be explained? Consumers are making purchases, but they are more cautious about them than in previous years. Real incomes are rising significantly, but the inflation shock of recent years remains fresh in consumers’ minds. This cautious optimism is likely to continue to characterize consumers in the months ahead.