Latvian retail sales grew by a calendar-adjusted 6.4% y/y in December, accelerating from the 4.7% annual expansion recorded the preceding month, data from the Central Statistical Bureau (CSB) showed on January 30.
November marked the 25th month in a row in which sales expanded, clearly a positive sign for economic growth. The pace of growth accelerated to a seasonally adjusted 4.8% y/y in the fourth quarter, the CSB said on the same day. While a slowdown on the 6.2% adjusted expansion in the third quarter, the reading keeps the Baltic state on track to post an improved growth in 2017 after mediocre expansion of just 2% in 2016.
Real incomes are expected to continue to rise in Latvia, in turn pushing retail sales, as the labour market continues to tighten. The average gross monthly wage in Latvia gained 5% in 2016, compared to 6.8% in 2015. In the third quarter, wages grew 7.5% y/y.
The recent performance of the retail sector remains close to the levels seen in 2015 when sales growth rarely fell below 4% y/y. In monthly terms, sales grew by a seasonally adjusted 0.2% in December, compared to an expansion of 1% m/m in November.
Despite losing some dynamics, the GDP reading in the fourth quarter strengthens the likelihood of economic growth pushing to at least 3% in 2017, with some analysts – such as Fitch – putting the projection at 4.1% this year.
Annual retail sales growth in December remained broad, with most segments expanding. Overall, sales of non-food products excluding automotive fuel increased 3.9% y/y, compared to an expansion of 4.6% y/y in November. Food sales gained 8.8% y/y against the annual growth of 5.4 in the eleventh month.