Czech retail sales declined in October 2013, erasing a gain in the previous month indicating that it may take a while until consumer confidence shows a sustainable recovery. Retail sales dipped 0.6% in unadjusted terms in October, following a revised 4.5% rise in September, data from the statistics office showed. Analysts polled by Reuters were expecting sales to drop by 0.1% y/y.

On a working day adjusted basis, retail sales in the tenth month of 2013 increased by 1% y/y and when adjusted for seasonal factors they went down by 0.8% m/m. October 2013 had one working day less than in the same month last year.

Auto sales increased for the seventh straight month in October albeit at a slower pace than in September but helped partly offset the decline in the other category – retail trade. Sales and repairs of motor vehicles grew by 2.2% y/y in October, after climbing 10.6% a month earlier. On the other hand, retail sales, including automotive fuel, fell by 1.8% y/y in October, contrasting with a 2.1% hike in September.

IntelliNews comment: The October decline in Czech retail sales shows that consumer confidence continues to be weak amid the fragile economic recovery. The economy emerged from an 18-month long slump in the second quarter thanks to a pick-up in domestic and foreign demand.  But it slipped into contraction in Q3 posting a 0.1% q/q drop suggesting that it may be heading back into recession. The still high unemployment and weak nominal wage growth are further dampening retail sales. On a positive note, Czech real wages grew for the first time in three quarters in Q3 albeit at the weak 0.1% annual pace.