In March Latvians spent more but future uncertain

The retail turnover in March, seasonal influence notwithstanding, grew 2.9% over February. The operational statistics indicated an expected rise in consumption already earlier: the mood of both entrepreneurs and consumers was improving over the past few months. The VAT contributions to the budget exceeded expectations, and even the number of vehicles registered with the Road Safety Department (CSDD) posted an annual increase for the first time since July 2007. An important factor in the rise in expenditure, however, has been the payout of the previously withheld pensions, which increased the possibility of expenditure for a proportionally large group of the population.

The December retail indicator remains the lowest so far, but it cannot be said with any certainty that only pluses can be expected in the monthly changes. Uncertainty still remains regarding both the tax policies and developments in Latvia and possible developments abroad.

The results of entrepreneur and consumer surveys published by the European Commission indicate that confidence in trade continued to improve rapidly in April whereas in the consumer mood index there a small deterioration is observed over the March indicator.

It is possible that the change in the mood of the population was affected by the published and widely discussed information regarding the decision making to bring about decreased budget expenditures for 2011 as proposed by the World Bank, which was a reminder that despite the positive signals in the economy, all difficulties have not been overcome. It is difficult to say whether a more cautious attitude will have a negative effect on the April retail data. At least for now, the operational data on tax income does not support such a hypothesis: the income from almost all taxes is greater than last year. It must be noted, however, that this year tax returns have also decreased, which makes an adequate evaluation of data more difficult.