Retail trade turnover continues on an upward trend, while consumer sentiment deteriorates sharply

In September retail trade turnover expanded by 0.9% month-on-month (at constant prices, seasonally adjusted data). Thus sectoral monthly growth was observed for the fifth consecutive month, with respective strengthening of the annual rate of increase as well, reaching 8.1% in September.

Aggregate retail trade (including sales of motor vehicles) also posted 0.9% month-on-month pick-up in comparison with August. Half of the increase was on account of a higher demand for furniture, household appliances and building materials, while a rise in motor vehicle sales and higher sales volume of automotive fuel contributed to it in equal proportion.

In the third quarter, retail trade turnover showed an impressive 5.7% quarter-on-quarter increase, whereas the pick-up in annual terms was 7.5%.

The business and consumer confidence indicators for October, released by the European Commission yesterday, show that after growing consumer optimism in the previous five months their confidence deteriorated considerably (by 2.5 points) in October. But could this worsening trigger precaution and spending moderation? To give an answer to this question, first we should understand the cause of the deterioration.

These are seasonally adjusted data, hence the onset of a harsher season – autumn rains and cold – could not account for a declining confidence. It seems this time it was not the dark clouds of the global economy that dampened the confidence – rather it was an awkward stepping into a puddle, if we can make such an allusion to the domestic political processes. In September an extraordinary election of the Saeima was held, generally facilitating positive emotions: both expectations traditionally related to the pre-election promises and the initial election results that obviously were subject to diverse interpretation but were more likely to promote optimism in many political camps. Some were happy about the victory of the Harmony Centre and hoped for its participation in the government; others rejoiced at the combat of the oligarchs; still others welcomed the strengthening of the national trend, etc. However, the government formation processes lasting for almost a month and a half obviously triggered the confidence deterioration. Nevertheless, a shift in confidence caused by such factors should not affect trade considerably, though such a possibility cannot be completely ruled out.