The pulse of trade stable, immunity good
From the beginning of the year, retail trade has been demonstrating a stable rhythm of change – just like an EKG: a rise in January, a drop in February, a rise in March, a drop in April. May data were published today and they once again point to a rise: retail trade turnover has increased by 2.6% (seasonally adjusted data at constant prices). Year-on-year, retail trade has grown by 8.0%, so the rate on annual growth remains high.
For Latvia, with its relatively small amount of consumption, such monthly fluctuations are characteristic, and the retail turnover slightly exceeds the level at the end of last year, so we can talk about a stable pulsating of the blood flow fully within norm. Under the conditions of weak external demand, it is domestic consumption that helps to ensure immunity for the Latvian economy; which is reflected by retail trade and the dynamic of private consumption. In the first quarter, private consumption became the determining factor in ensuring economic growth, leaving export in second place.
Role for domestic consumption will remain stable in the coming months as well, at least the data for June should not hold any surprises – tax revenue is collected slightly above the planned amount, consumer and business confidence remains stable. The June survey data published by the European Commission yesterday indicate that Latvian consumer confidence has improved by 1.1 points (the drop in May was in the same amount). Retail trade confidence, on the other hand, has deteriorated by 1.3 points (after improving in May by 2.1 points). Stable fluctuations.
Domestic consumption cannot maintain strong immunity for long, therefore the signals that the situation is improving in Europe constitute good news. The overall European economic sentiment index has been improving for two consecutive months and bad news seem to be abating. Although the possibility that Latvia may be negatively affected by the development of negative scenarios outside Europe, overcoming the crisis-related turbulence has made our economy and financial structures stronger. As a result, we can expect that in the coming months as well the good growth of trade and consumption will act to compensate the slowdown in the industrial sector.