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Friday 19.01.2018 | Name days: Alnis, Andulis
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Economists: fuel and food prices hamper retail trade

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Baltic news, News from Latvia, BNN-NEWS.COM, BNN-NEWS.RUHigh fuel and food prices foster the overall retail trade turnover drop, so does Latvia residents’ cautiousness in expenses that most likely will not change in the coming months, economists say.

Swedbank senior economist Lija Strašuna:

This April the seasonally adjusted retail trade turnover dropped 1% over the previous month, mainly due to declining fuel sales (- 6.7% over the month).  Global oil price developments and tax increases have an impact on fuel prices . With fuel becoming more expensive, its consumption is dropping as well, boosting the share of illegal fuel.

Retailers’ sentiment has remained fairly stable for several months. Namely, they do expect neither rapid sales growth, nor any worsening of the situation. While consumers are still cautious in their spending and do not await their financial situation or the state economic situation improvements.

Sentiment of retailers and consumers, inflation eating up the small wage growth, relatively stable household deposits – all this shows retail and household consumption is to remain poor and volatile in the following months as well.

SEB bank economist Dainis Gašpuitis:

Retail sector reports variable trends not subject to generalisations. Sharp price gains keep having a negative impact on the purchasing power, which is also reflected in the activity of various trade sectors. However, there are also sectors that compensate for the rapid price surges with their growing turnover, which means not all traders look in the future pessimistically.

In April, compared to the same month a year before, retail turnover at constant prices grew 3.9%. Climbing inflation still makes people revise their consumption basket and seek for ways to save. This way high food prices contribute to the interest in home-grown food, thus there is growing demand for both various seeds and plants, as well as, materials for setting up a hothouse.

Similarly, also spiking fuel prices make people consume it less. The excise tax rate coming into force this week will add to the price gains as well. So, it is expected fuel price consumption will drop more and more, dragging down also the total retail performance.

DnB Nord bank economy expert Pēteris Strautiņš:

The key reason for the drop lies in poor fuel sales, excluding this, retail turnover surged a little in April both yearly (+1.9%) and monthly (+0.2%), moreover, it is already for the fourth consecutive month. April also marked record high fuel prices, as they dropped significantly in May. Settling payment for fuel is a painful move for drivers, thus they try to delay the process as much as possible. Most probably, spiking prices have also added to bigger interest in the black market. Excluding both fuel and food, yearly rise is quite considerable( +4.8%).

Purchasing power is gradually growing, but not spending itself. But the economically active population – businessmen see improving financial situation.

In the meantime, excessive cautiousness from the part of consumers is now becoming the main force to hamper the economic development. People are under an impression the crisis taught them a lesson to be very cautious about spending.


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