Retail trade paradox this year: confidence deteriorates, yet the turnover grows

The precise rhythm according to which retail trade grew and dropped ceased in September, retaining the same level of sales amounts as in August. Year-on-year, the retail trade turnover has grown by 2.1%. Because of the higher base for year-on-year growth, a slowdown has been observed since the beginning of the year: at the beginning of the year, the rate of increase was 2-3 times higher.

Retail trade in the third quarter has grown by 2.0% quarter-on-quarter, so, despite the slowing in the annual rate, consumer activity has grown in recent months.

Today, the European Commission (EC) published the (October) retail trade and consumer confidence indicators. The results of these surveys indicate that consumer confidence has deteriorated by 0.8 points in October, whereas trade confidence has improved by 0.5 points. Compared to January, both confidence indicators have deteriorated – by 6.2 and 5.6 points respectively.

Albeit there is not always a coincidence between the changes in confidence and trade amounts in a given month, the trends are related: as optimism grows, usually so does spending. This year, a difference in dynamic is observed, however. Consumer and retail trade confidence indicators have deteriorated: this is obvious both from the abovementioned EC data and the results of monthly surveys of the DNB Latvian barometer. The retail trade turnover, on the other hand, has been gradually growing. The difference in this dynamic was determined by several factors, including more activity in the flow of tourists and spending of lats cash accruals before the euro changeover, which promotes a rise in trade turnover.

Next year, the situation could reverse itself – as the euro changeover work is completed, the population and business confidence could improve more rapidly, whereas in trade, more moderate growth is expected.