Trade on decline, consumer sentiment favourable

In December month-on-month, the retail trade turnover decreased by 1.9%. Although shops were bustling with seasonal buying surge, the overall trade activity continued on a slightly downward trend. As previously, the contractions in sales volumes were triggered by lower personal income and rising precaution on the backdrop of mounting uncertainty about the development of economy and personal incomes in the future.

Retail trade turnover of food products shrank by 1.4% in December while that of non-food commodities decreased by 2.1%. The combined indicator for food and non-food products had been progressively down for the last six months, whereas motor vehicle sales (outside the former indicator) demonstrated more pronounced fluctuations, rising by 11% in November and falling by 5.3% in December.

Both overall retail trade turnover and motor vehicle sales were down to the third quarter level of 2004. However, the development trends of both indicators have differed greatly, with the demand for motor vehicles rising more steeply than the overall retail trade turnover during the economic upturn and, consequently, falling more dramatically during the downturn phase.

As January and February are likely to see the decline in disposable income to continue and not to be offset by positive developments in exports and manufacturing as yet, no expanding trade volumes should be expected. Nevertheless, the recent consumer sentiment indicators are agreeable and record a notable improvement thus supporting the position of "cautious optimism" with regard to the future outlook.

At this junction, it is difficult to state whether population's more optimistic views regarding future developments in both personal budgeting and national economy stem from the awareness of economic bottoming out and expectations of subsequent positive trends, or have been triggered either by the Constitutional Court ruling in favour of the retired people or by any other circumstances. If they prove a turning point toward improving consumer confidence indeed, they will soon find their expression in trade indicators as well, particularly so when the ongoing positive economic developments begin to be reflected in nation's wellbeing.

APA: Rutkovska, A. (2019, 21. feb.). Trade on decline, consumer sentiment favourable. Taken from https://www.macroeconomics.lv/node/2492
MLA: Rutkovska, Agnese. "Trade on decline, consumer sentiment favourable" www.macroeconomics.lv. Tīmeklis. 21.02.2019. <https://www.macroeconomics.lv/node/2492>.
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