Commentary on Retail Sales Data of August 2009

The retail turnover in comparable prices diminished by 3.3% over July, contrasting with the positive assessment of new opportunities in Latvian and external markets made by representatives of several industries, food and wood pulp in particular, citing a more attractive pricing policies and improvements in population and entrepreneur mood indices.  The results indicate that the first signs of economic stabilization are still very fragile.

The downturn in retail turnover was mainly determined by the drop in demand for nonexpendable goods with the demand for food items remaining at the previous level. Car sales, which are accounted for separately from retail turnover, indicated a 6.5% rise in August.

The improvement in retail data is expected to be gradual and uneven from month to month, diminishing with the amendments to budget expenditure and growing as the consumer and enterprise mood improves. To bring about a faster recovery of the economy, including a renewal of trade along with the optimization of the state administration we should not forget about stimulating the economy, using the EU funding in a more purposeful way and easing the bureaucratic burden.

Of essence is also a speedy development of the 2010 budget, which is necessary not only to balance state expenditure and income but also to restore investor and lender confidence. Should confidence in the state’s ability to discharge its liabilities and observe consistent government policies decline, it will create an additional pressure on the cost of necessary financing both for the public and private sectors.