Czech retail sales growth accelerated dramatically to 7.8% y/y in March, according to data reported by statistics office CZSO on May 9. In seasonally-adjusted terms the expansion was 7%.
The March figures will offer hope that Czech retail turnover may be embarking on a firm recovery course, although the first quarter performance echoed the erratic second half to 2016 with a weak February. The ongoing tightening of the labour market offered momentum to private consumption to make it the main driver of economic growth last year, but growth was uncertain at points. The March data suggests consumption is ready to play another leading role this year, and that it likely helped the economy to a robust first quarter.
Following a disappointing 3% gain in December, retail sales growth started this year with a far healthier 5.6% in January. A short February offered a rise of just 0.6%, but 4.8% when adjusted. While a rise in inflation and slowing improvement in unemployment is likely to dampen consumption growth somewhat this year, appetite should still remain robust. March retail sales gained 1.2% m/m.
“Retail sales will moderate their growth slightly this year, but their dynamics will still remain at a very good 3.9%,” predict analysts at Komercni banka. “They will continue to find support from the favourable labour market situation, in which the unemployment rate is at historical lows, and which applies pressure for further wage growth.”
Details within the March data add further illustration of the confidence of consumers. As in February, headline growth was driven by sales in non-food categories, which added 11.5% y/y. That shows the increasing willingness of households to spend on discretionary goods.
Sales in culture, sports and recreation gained an impressive 14.6% y/y. Sales of cars, which are not included in the headline figure, increased by 1.4% m/m, after seasonal adjustment, and 7.1% in annual terms. Staples including food and fuel sales dropped, which is likely an effect of strong inflationary pressures on those categories.