The amounts of fuel sold in March up sharply. Where are we driving to?

After a drop in February, the retail trade turnover in March increased by 2.1% (seasonally adjusted data at constant prices), primarily determined by a rise in demand for foodstuffs (+2.4%) and automobile fuel (+7.8%), with the sales volumes of other non-food goods even dropping slightly (-0.4%). Year-on-year, sales have increased by 8.8% - thus still rather rapidly.

In the first quarter of 2013 overall, retail trade has grown 2.5% quarter-on-quarter and 7.2% year-on-year. Higher year-on-year growth rates have been observed for non-food goods: +6.2% (automobile fuel not included), foodstuffs +5.5%, and automobile fuel has reached even a 13.4% rise. A role in the rise in sales volumes of automobile fuel has likely been played by a contraction in the grey economy, with the general population and entrepreneurs choosing to shop in the official fuel sales places. Different sales promotions and changes in fuel prices have also had their impact.

The amount of expenditure tends to follow the trends in population income. In some periods, however, an important role is played by other factors – price changes, the formation of prudent accruals or their spending (postponed consumption), planned changes in tax rates, tourist expenditure, grey economy etc. A contribution in the retail turnover is also made by the purchases of legal persons, which could be one of the reasons why trade is growing faster than income of the population

To predict developments in the near and not so near future, economists analyze also the sentiment of market participants, i.e. what the consumers and traders are thinking about what is likely to happen.  Yesterday the European Commission published the latest (April) confidence indicators for business and consumers.  The results of the surveys indicate that we have lost the title of the greatest European optimist to Lithuania and Malta. It is interesting to note that better than expected growth is also posted by Lithuania’s gross domestic product made public today.

The drop in the Latvian economic sentiment index is mostly on account of the assessments by manufacturers, service providers and traders, whereas consumer confidence over the last two months has even improved somewhat. What changes in trade can we predict for the future?

The trader and consumer confidence indicators have been pointing to contradictory trends for almost three years now. After a rapid improvement at the beginning of 2010, when the Constitutional Court took a decision that resulted in paying out the withheld pensions, trade confidence has remained practically unchanged. Consumer confidence has been gradually improving over the past three years.

The retail turnover dynamic better matches the trend of a gradual improvement in consumer confidence and could remain this way also in the future. The consumer confidence indicator is still rather stable, so no sharp turns should follow in trade. A drop in growth rate is to be expected, however, they will diminish as a result of a slowdown in income growth whereof the first signal comes from the industrial sector: the rate of production output is down substantially, hence also that of income growth.