Estonian retail sales grew just 2% y/y in January, according to data released by Statistics Estonia on March 3. 

The reading shows the effect of the high base from last year. The growth rate in the first month of 2017 well below the 8% annual expansion in January 2016. In monthly terms, retail sales crashed 18% in January, a standard effect of the Christmas season. Turnover sank around 20% in monthly terms in January 2016.

Despite the dip, retail sales have now grown each and every month since June 2013, only infrequently falling below 5%. The expansion is fuelled by a tight labour market and – until recently – very low inflation. Alongside fast growth in industrial output, that should offer momentum for GDP growth in the coming quarters.

GDP grew 1.6% in 2016, improving on the six-year low of 1.1% seen in the preceding year. Estonia's GDP is predicted to expand 2.2% in 2017, according to the European Commission. Swedbank offers the same forecast, but is more optimistic than Brussels about growth in 2018, which it sees at 2.8%, 0.1pp above the estimate of the EU executive.

The annual growth in December's retail sales came on the back of an 11% expansion in sales of manufactured goods. Most other sectors of goods showed growth as well, including an expansion of 12% in stores selling household goods and appliances, hardware and building materials, and sales via mail order or the internet, which boomed 54%. Meanwhile, sales of automotive fuel fell 15% and food sales contracted 1% y/y in January.