Czech retail sales growth accelerated to 6.6% y/y (both in adjusted and non-adjusted terms) in June, according to data reported by statistics office CZSO on August 4.

The result offers some welcome stability to an indicator that has proved erratic in recent quarters, even in adjusted terms. Shop turnover rose 6.9% in May, but that followed a disappointing 4.8% gain the previous month. Retail sales expanded 0.7% in monthly terms.

The first quarter performance of retail sales echoed the erratic second half of 2016. Despite that, GDP growth in January-March was buoyant, with the ongoing tightening of the labour market having turned private consumption into a major driver of economic growth. The strengthening of retail sales growth in the second quarter bodes well for another strong performance.

While a rise in inflation and slowing improvement in unemployment is likely to dampen consumption growth somewhat this year, appetite should still remain robust for some time yet. In particular, wages growth is starting to accelerate after lagging employment trends.

“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.”

The details behind the June retail sales growth offer further illustration of the confidence of consumers. As in the first quarter, growth was led by sales in non-food categories, which added 8% y/y compared to an expansion in the groceries segment limited to 3.7%. That shows the increasing willingness of households to spend on discretionary goods.