Sales Forecasts Revised On Weak Macro Outlook
In light of our increasingly bearish consumer and manufacturing outlook for Poland, we are revising our sales forecasts for both the passenger car and commercial vehicle segments.
Indeed, as investment and government spending in the country weakens, combined with the continued deterioration in eurozone demand, we forecast real GDP growth of 2.3% in 2012. Economic growth slowed from 3.4% in Q112 to 2.3% in Q212, with high frequency indicators showing a further slowdown in the third quarter. Industrial production, for instance, contracted by 1.6% year-on-year (seasonally adjusted) in September.
|Weak Consumer Demand Hits|
|Poland Monthly Passenger Car Sales, CBUs|
Over the first 10 months of 2012, passenger car sales in Poland increased 1.8% y-o-y, to 229,209 units. Despite strong growth earlier in the year ( see graph below), sales have decreased in recent months as weak consumer demand continues to have an impact. The ongoing deterioration in private consumption, and declining sales growth have prompted us to revise our sales forecast to a 2% decline over the year.
We believe that private consumption is likely to lag headline growth. Household spending growth decelerated gradually from 3.7% y-o-y in Q410 to 1.2% in Q212, despite strong headline GDP growth over the period. Retail sales data indicate that this slowdown continued into the third quarter, with the average monthly retail sales slowing to 5.3% y-o-y, from 12.9% in Q112. Falling export demand and weaker investment in 2012 have reduced nominal wage growth from a monthly average of 5.4% y-o-y in Q112 to 2.2% in Q312. Wage growth is likely to remain tepid even once the economy picks up in H213 given the slack in the labour market, with unemployment at 12.4% in September. This weak private consumption picture has impacted passenger car sales, and partly informed our sales forecast revision.
Uncertainty surrounding the eurozone is likely to reduce private investment plans over the coming months. This slowdown in fixed capital formation is already well under way, with growth in this component decelerating from 6.0% y-o-y in Q112 to 1.3% in Q212.
The slowdown in investment growth, combined with weak consumer sentiment and a poor macro outlook, will also impact the manufacturing sector. We believe that this will adversely affect commercial vehicle sales, and our 2012 sales forecasts have become more bearish across these segments.
Light commercial vehicle sales declined 5.2% y-o-y over the first 10 months of 2012, to 31,264 units. BMI now forecasts a 4% decline over the year. Heavy truck sales declined 3.2% y-o-y over the first 10 months of 2012, to 13,604 units. BMI now forecasts a 2.5% decline over the year. Bus and coach sales declined 10.4% y-o-y in the first 10 months of 2012, to 1,017 units. BMI now forecasts a 9% decline over the year.