In October, retail posts growth, albeit slow

According to the Central Statistical Department data, retail turnover in October 2013 grew a slight 0.4% month-on-month (seasonal factors excluded). Year-on-year, turnover increased by 3.4%. Both month-on-month and year-on-year, the fastest growth rate was observed in durable goods categories: in the retail trade of metal products, construction materials and plumbing as well as the retail trade of furniture and other kinds of household equipment.

Albeit slower than before, retail trade turnover has grown over the entire 2013, somewhat slowing down only in some months.

As the main factor that determines the growth of the branch we should of course mention the gradual improvement in the situation in the labour market. The average net salary also continues to rise at an annual rate of 4-5% per year, in line with the previous few years. A pronounced and growing contribution to retail growth in the summer months is made by an ever increasing inflow of tourists. In recent months, retail growth has slowed down a little and as a result, the annual growth rate has dropped rather low. That can be explained by the good results of the corresponding months of last year or base effect or there may be some short-lived changes in consumer behaviour: for instance, some of the income is saved or spent on services, purchases of real estate or something else of that kind.

In the remaining months of the year, retail turnover is expected to possibly continue growing, which will be determined by the same fundamental factors as before: the low inflation and increase in the disposable income of households. In addition, the population may respond to the euro introduction by avoiding currency exchange and spending some of their cash savings for purchases of some durable goods. At the beginning of next year, there could be an opposite effect.  

The confidence indicators aggregated by the European Commission have been rather volatile lately. Overall, however, the views of consumers have slightly deteriorated in the second half of the year, which may explain why the annual rate of growth in retail has become slower than the rate of growth of disposable income. One of the explanations could be that households might be developing some sort of security savings, which is supported by the data on the amount of deposits. The deterioration in the consumer confidence indicator was determined by a more negative outlook of consumers on further development of the economy as well as their own net worth. Interestingly enough, the confidence of the other party to the transactions, traders, has improved substantially.

We predict that the in 2013, the value added of the trade branch (which also includes automobile retail and wholesale) could increase by about 5%, with the growth somewhat moderating in subsequent years – at approximately the same rate of increase as disposable income of households.