Retail sales in Poland increased more than analysts’ forecasts last month, indicating consumption will be the principal driver of growth in the country’s economy this year.

Retail sales rose by 6.1% year-on-year in February at constant prices, according to figures published on Thursday.

Analysts surveyed by Reuters news agency had forecast a year-on-year increase of 4.9%.

Consumer spending has been a crucial driver of Poland’s economy, although it was hindered in the past by steep increases in prices. That said, inflation has since decelerated, dropping to 2.8% in February from its previous peak of 18.4% a year ago.

According to analysts, consumers are now more upbeat in regard to their financial situation, leading them to become more willing to spend money, Reuters reports.

“This is not a consumption boom, but we have confirmation that consumption will be the main (who knows, maybe not the only) engine of GDP growth this year,” according to a note published by Bank Pekao analysts.

Furthermore, the significant growth in wages is also beginning to manifest in increased consumption, said ING analysts, reaching its highest pace since 1999. In February, wage growth stood at 12.9% year-on-year.

“Our baseline scenario for this year assumes a continued recovery in real household disposable income and consumption. We also assume investment will grow, albeit at a slightly lower rate than in 2023, but hopefully involving a wider range of companies than in 2023 when only a few large companies grew investments,” an ING note said.

“In our view, nominal disposable income growth will exceed 10% in 2024, and - in a lower inflation environment – this will leave enough room for both savings to recover and consumption to grow. Our forecast for GDP growth in 2024 is 3.0%, but we see a chance for faster growth,” ING added.