Latvian retail sales grew a calendar adjusted 3.1% y/y in June, a slowdown on the 3.8% annual expansion recorded the previous month, data from the Central Statistical Bureau (CSB) showed on July 28.

Still, June marked the nineteenth month in a row in which sales expanded. Growing retail sales are a positive sign for economic growth, their recent performance close to the levels seen in 2015 when sales growth rarely fell below 4% y/y. In monthly terms, retail sales contracted a seasonally adjusted 0.7% in June. 

Latvia’s GDP expanded just 2% in 2016, a slowdown from 2.7% in 2015. However, the pace of growth accelerated to 4% y/y in the first quarter. The reading strengthened the likelihood of economic growth pushing to 3.2% in 2017, as forecast by the European Commission. A flash estimate of growth in the second quarter is due on July 31.
 
The annual retail sales growth in June was broad, with most segments expanding. Sales of cultural and recreation goods expanded 23.7% y/y, followed by sales of information and communication equipment in specialised stores, which grew 19.8% y/y, and sales of clothing, footwear and leather goods, growing 14% on the year. Overall, sales of non-food products increased 4.7%, while food sales gained 1%.

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 first quarter, wages grew 7.2% y/y.