Several positive aspects observed in connection with the trade data of the most recent months

Retail trade turnover (at constant prices; seasonally-adjusted) decreased by 0.4% month-on-month in September, thereby reversing the stable growth trend observed in the recent months. In annual terms (over September last year), the growth rate remained high at 7.9% on account of the rise achieved in the previous months: retail trade had followed a steady and quite steep upward path since May 2012. Against the backdrop of such an impressive improvement, this slight deterioration in September is no reason for feeling disappointed.

Lately, so much has been said about poverty and income inequality that I would like to highlight several positive aspects in connection with the trade data of the most recent months, for the sake of balance.

We can be happy about the fact that, since May, the growth in trade has been driven by a rising demand for consumer non-durables which means that the proportion of households with improvements in their financial well-being is already larger. In the previous years, any steeper increases in sales were primarily associated with the postponed consumption boosting the demand for consumer durables. Higher demand for new cars, electrical appliances and other expensive goods was, of course, rather an indication of changes in the financial well-being of more affluent households, i.e. those who had made precautionary savings during the crisis period and who could afford such purchases once the situation stabilised.

There is another positive message: the shift observed in demand from consumer durables to consumer non-durables, particularly food, has combined with a shift in demand from imported goods to domestic goods. The proportion of Latvia-produced goods is much higher in the supply of food products at shops than in catalogues for electrical appliances or cars. Consequently, it supports production: higher profits for both farmers and manufacturers as well as new jobs.

Nevertheless, several questions and uncertainties remain in association with this growth. Fuel sales increased sharply in the recent months (with the exception of September). Something like that always leads to a question as to what part of this rise is associated with changes in the proportion of the grey economy. Overall, the rising demand for fuel and the shrinking of the grey economy mark several positive processes. The fuel consumption is boosted by improvements in employment: commuting expenses, possibly also the travel costs of summer trips. The rise in legal sales is also associated with better financial position of households, improved tax administration and higher confidence in the government.

The released September data enable us also to look at the third quarter results. Sales improved considerably quarter-on-quarter in the third quarter (by 5.8%). This improvement also pushed up the annual growth rate (by 9.5%). However, when looking at the trade sector overall, including the sales of motor vehicles, the increase is much more moderate.

Considering the good performance of trade, the growth reported in agriculture and manufacturing, we can legitimately expect decent third quarter results in the case of the gross domestic product. These will be published soon, as the Central Statistical Bureau of Latvia is scheduled to release the new flash estimate for the GDP on 9 November. Without major doubt, we can hope to retain the leading position also among the European Union Member States.

APA: Rutkovska, A. (2019, 22. feb.). Several positive aspects observed in connection with the trade data of the most recent months. Taken from https://www.macroeconomics.lv/node/2177
MLA: Rutkovska, Agnese. "Several positive aspects observed in connection with the trade data of the most recent months" www.macroeconomics.lv. Tīmeklis. 22.02.2019. <https://www.macroeconomics.lv/node/2177>.

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