Rapid retail growth for a third consecutive month

The retail turnover in July (seasonally adjusted data at constant prices) grew 1.8% month-on-month and 6.4% year-on-year.

How does it look in terms of the overall sector dynamic? A brief synopsis of previous developments is probably in order. After a rather weak performance of the sector at the beginning of the year, a substantial rise followed in May and June as of now supplemented by yet another month of growth. In contrast to the beginning of the year, when growth was persistent only for durable goods, in recent months it was observed also for certain groups of consumer goods. The demand for automobiles, furniture and home appliances was primarily determined by the postponed consumption – the utilization of previous savings as confidence in the future grew. This factor serves as a vivid illustration to the disparity of the material well-being of the population. The increasing number of the employed, however, which has been observed in recent months, has promoted the expansion of the segment of the population with regular income, which provides a more solid basis for the growth of the sector and the economy at large. The rise in demand for consumer goods is a piece of good news, but the positive signals are still weak – the resumption of the demand for consumer goods is slow, plus it can be affected by changes in the grey economy, tourist activities and other factors not directly related to the population's financial means.

The statistics of automotive fuel sales serves to illustrate the substantial influence of the grey economy, which seems not to have much to do with the boom in car sales. While motor vehicles  sales continue to grow rapidly (the monthly changes in July at +8.5%), fuel sales are dropping (by 3.1%). A part of automobile sales of course is related to re-exports and thus may not appear in domestic transportation, yet the difference between these trends is striking.

A modest contribution to retail growth is also made by tourists. In the second quarter of 2011, 287 thousand foreign visitors were served by Latvian hotels and other accommodation establishments[1], which is an increase of about one third (31.2%) year-on-year. The number of visitors from Russia has grown particularly rapidly, by 80%. The effect of tourist expenditure is naturally greater on the hotel sector, transport services and catering industry, yet travellers purchase also fuel, food, souvenirs and other goods.

Today the August confidence indicators were published by the European Commission, pointing to a drop in the retail trade confidence indicator by 2.0 points, whereas the consumer confidence indicator has improved by 3.3 points. The improvements in the Baltic confidence indicators have been contrasting with their rapid deterioration in other European countries for some time now. That begs the question how long we will be able to withstand global trends. Are we approaching a turning point? The August economic sentiment indicator has worsened in the Baltics as well; moreover, the industrial confidence indicator worsened, signifying our lack of immunity against developments elsewhere in Europe and the world. In all likelihood, it points to a drop in external demand, which may later find a negative reflection in the domestic processed, including trade. Albeit economic development is likely to slow down as a result of global developments and there is no reason to predict a rapid and stable growth in the medium term, this year's results in trade will remain positive owing to a steep rise in the middle of the year.

APA: Rutkovska, A. (2022, 26. may.). Rapid retail growth for a third consecutive month. Taken from https://www.macroeconomics.lv/node/2303
MLA: Rutkovska, Agnese. "Rapid retail growth for a third consecutive month" www.macroeconomics.lv. Tīmeklis. 26.05.2022. <https://www.macroeconomics.lv/node/2303>.

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