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Economists: small retail trade increase rates will not be maintainable this year

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The small retail trade turnover increase will be reflected on in the publicly available data for February of the Central Statistics Board, however economists of Latvian banks express precaution on this matter, noting, that this increase will not continue in the coming months.

Swedbank senior economist Lija Strausuna:

Increase of the income of residents was not so big to ensure a steep increase in spending, furthermore only the income of a specific part of society has increased. But lower prices along with bigger resident’s optimism could motivate them to purchase long lasting products. Household credit window has also become smaller. Consumer mood in the beginning of the year continued to improve. But it is somewhat of a paradox that the significant increase in consumer optimism in the beginning of February occurred because even more residents planned to save up some money in the next 12 months. Meanwhile the evaluation of the financial state of households for the coming months did not improve all that much. This could mean that, residents plan the so called “precautionary” savings and will spend money more carefully.

Unfortunately there are still many households in Latvia, which cannot afford larger purchases, even despite attractive prices. Furthermore the number of residents continues to drop. Most likely, the increase in the turnover of small retail trade is maintained by the more prosperous part of society. It is possible, that instead of celebrating the increase in spending and the relative income in taxes, it would be necessary to urgently take the responsibility to solve the problem of inequality.

SEB Bank economist Dainis Gaspuitis:

The new year in small retail trade began with unexpected and rapid changes. This kind of increase creates a lot of questions, because an equally rapid increase in the relative month was noted in 2005 and 2007. Of course, caution ruled the last years, but even future perspectives do not predict the possible return of fat years.

Though January’s data is surprisingly good, the next months’ spending activity will be seriously affected by costs for heating. The set rate is simply not maintainable. Consumer mood will be most important. But experience shows, that external events do not significantly affect consumer mood, it is mostly affected by events in the country.

Latvian Bank economist Agnese Becevska:

There are many factors which could have provoked the increase in non-food product purchases: smaller heating costs because of a warm period of October-December, cash withdrawal after the events in the bank sector, deferred consumption, the improvement of consumer mood and others. We will not see any more sudden jumps in the trade sector, because the new costs for heating do not cultivate optimism and spare finances.

Another factor which could have influenced the purchases, but there is still no operative data on it, is – salary changes. Even the social sector expresses the lack of workers and it is assumed that the reasons vary from benefits, to salary increases and other motivational options including health insurance. Even in the past, some businessmen noted that salary size increases in the fight for employees. It is possible that the promised addition to salaries affected consumption in January, and Christmas benefits could have added to the wallets.

Aside from small retail trade vehicle sales in January, when compared to December, dropped by 6.5%, but compared to last year’s January, a solid increase is preserved (by 20.5%). Sales were affected by not only resident consumption, but also by legal persons spending – especially in the long lasting product group.

Ref: 102.109.109.785

 


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