Retail trade has grown by a quarter since the lowest point of the crisis

The retail turnover in July grew 2.7% month-on-month, and 10.3% year-on-year. The sales volumes thus are still within the two-digit growth zone, which is good from the point of view of economic activity, even though there are a few “buts”.

Already beginning with January 2010 we can talk about a gradual growth in trade volumes: over this period, sales volumes have increased by 25.4%. Even though the growth has been substantial, it is almost 25% behind the expenditures from the boom period. One must add, however, that the rapid rises in salaries that outpaced productivity and the growing of debts are shaky summits that, once reached, can cause a painful rolling downward. Therefore, comparison with the “years of plenty” is relevant only for study purposes, to understand how demand has changed and what factors should be considered in analyzing the data: e.g., the gray economy, purchases by tourists, purchases in markets and directly from farmers etc.

Here we will have a closer look at the sales of fuel for automobiles, whose volumes are more affected by the processes in the gray economy than other groups of goods. According to official data, the sales volumes of car fuel have grown moderately compared to the lowest point and this lowest point has been registered a year later than on average for other types of goods, i.e. April 2011. A more rapid growth in the sales volumes of fuel (at constant prices) has been observed only since the beginning of this year.

It cannot be denied that both the population and businesses have become more frugal, trying to drive more rarely or for shorter distances and choosing alternative means of transportation because of the rises in fuel prices and limited purchasing power. It should likewise be taken into account that demand is not homogeneous: it may fluctuate from month to month as a result of planned changes in tax rates or fluctuations in fuel prices. The impact of illegal trade in fuel, however, is substantial in this price group as evidenced by a population survey. Because fuel prices have gone up since the survey was conducted (in May 2011), frugality and possibly the desire to obtain illegitimate fuel are still topical. A more rapid rise in the official sales volumes as of the beginning of the year, however, might point to the fact that the share of illegal sales is beginning to drop in this segment of goods as well.

According to various observations, the level of gray economy has been dropping over the past year and the purchasing power of the population has been improving, albeit slowly, so a further shrinking of the gray economy could be reflected in a more rapid rise in official sales volumes.

APA: Rutkovska, A. (2019, 21. feb.). Retail trade has grown by a quarter since the lowest point of the crisis. Taken from https://www.macroeconomics.lv/node/2195
MLA: Rutkovska, Agnese. "Retail trade has grown by a quarter since the lowest point of the crisis" www.macroeconomics.lv. Tīmeklis. 21.02.2019. <https://www.macroeconomics.lv/node/2195>.

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