A more stable retail growth in the third quarter, but is it here to stay?

Overall, the third quarter of 2014 in retail can be characterized by a period of gradual growth, which has been mostly impacted by a rise in disposable income of the population. Caution is dictated by several factors, including the deterioration in the consumers' mood, the uncertain geopolitical situation, the inadequate speed of recovery in Europe etc. 

Retail continued to grow in the third quarter: year-on-year, sales increased by 3.8% and quarter-on-quarter, by 0.6%.

In the first six months, the retail dynamic was very unstable, with a rapid drop in January and February after the euro changeover followed by a rise in March, a retail "boom" in April because of the warm Easter and a drop again in May and June. After this roller-coaster ride, retail trade in July once again posted rapid growth that went only slightly down in August and September.

Overall, we can thus characterize the developments in the third quarter as a return to a more stable gradual growth that is primarily determined by a rise in disposable income instead of one-off factors.  

Yet the impact of one-off factors cannot be completely excluded, for every year brings its own weather and holiday "scenarios" and this year is characterized by a rapid rise in the number of tourists, particularly in relation to Riga's status as a culture capital of Europe. The third quarter is a culmination of the tourist season, so the spending of foreign guests has made its contribution to the income of retail trade places.

When analyzing retail trade, the geopolitical background should also be taken into account. Although the Russian sanctions have a direct impact mostly on external instead of domestic trade, supply and prices can change domestically as well: milk prices, for instance, went down, whereas those of fruit and vegetables, where a diminishing influence of the Russian sanctions could have been expected, rose in September. As a result, with the supply of some goods increasing in the domestic market, not much relief was at hand for the population – at least not for now.  

The Russian-Ukrainian conflict can have more of an indirect impact on retail. The consumer confidence indicator has deteriorated substantially in recent months. In response to the uncertain geopolitical situation, the slow recovery of the European Union economies and other factors, the population may become even more cautious and form accruals while limiting spending.

Already since last year, private consumption has been the main engine of the gross domestic product growth (GDP).  It also accounts for the greatest percentage in GDP use – about 62% of GDP. Should households begin to limit their spending, it will affect not only retailers but also producers, construction businesses, service providers and last, but not least, the state budget. 

APA: Rutkovska, A. (2022, 27. may.). A more stable retail growth in the third quarter, but is it here to stay?. Taken from https://www.macroeconomics.lv/node/2007
MLA: Rutkovska, Agnese. "A more stable retail growth in the third quarter, but is it here to stay?" www.macroeconomics.lv. Tīmeklis. 27.05.2022. <https://www.macroeconomics.lv/node/2007>.

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