Retail posts a rapid rise in June

Despite the tropical climate in the last few weeks, the retail statistics in Latvia have seemed more associated with downhill skiing over boulders, replete with sharp turns and high jumps. The sales volumes are rising and falling, yet, in contrast to a ski run that ends at the bottom of the hill, the overall trend in retail development points upward.

The statistics of the last few months support this growth trend. Growth in trade was observed as early as May, but in June it continued with a rather sharp  upward leap – 3.3% month-on-month. The annual growth has thus also increased to 5.4%. The second quarter has likewise concluded "in the black", with turnover increasing 2.7% quarter-on-quarter and 1.6% year-on-year.

A rapid increase has been retained in automobile sales, which are not included in retail turnover data. A 4.5% growth month-on-month and 57.5% annual growth were recorded in June.

This upward dynamic is determined by several factors. The increase in consumption is fostered by the gradual rise in employment, as the segment of the population with steady income and a greater sense of security regarding the future expands, which often signals greater expenditure. Sales volumes and structure are affected also by postponed consumption, i.e. the spending of previously accumulated savings, particularly when purchasing durable goods. A rise in the average salary has also been observed lately, yet any improvement in purchasing power is limited by the inflation resulting from tax raises and the rising global prices (especially food).

The July confidence indicators published by the European Commission point to a drop of 2.0 points in the retail trade confidence indicator whereas the population confidence indicator shows a slight improvement of 0.3 points. Even though the changes in confidence indicators in Latvia have been more positive than in other European countries, both the confidence cyclones coming from Southern Europe and the United States and the domestic political developments will persist as a backdrop of uncertainty and continue to affect consumer behaviour and decisions. The bumpy run of retail trade development will thus probably retain its up-and-down quality also in the coming months, and the May-June high upward leap will be followed by a drop or two.