Latvian retail sales grew by a calendar-adjusted 4.7% y/y in November, accelerating from the 4.5% annual expansion recorded the previous month, data from the Central Statistical Bureau (CSB) showed on December 29.

November marked the 24th month in a row in which sales expanded, clearly a positive sign for economic growth. 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 1% in November, compared to an expansion of 0.2% m/m the previous month.

Latvia’s GDP expanded just 2% in 2016, a slowdown from 2.7% in 2015. However, the pace of growth accelerated to a seasonally adjusted 6.2% y/y in the third quarter.

The GDP reading strengthened the likelihood of economic growth pushing to 3.2% in 2017, as forecast – somewhat cautiously – by the European Commission. Fitch puts the projection at 4.1% this year.

Annual retail sales growth in November remained broad, with most segments expanding. Overall, sales of non-food products excluding automotive fuel increased 4.6% y/y, compared to an expansion of 4.3% y/y in October. Food sales gained 5.4% y/y against annual growth of 4.5 in the tenth month.