Latvian retail sales grew by a calendar-adjusted 4.5% y/y in October, slowing down from the 4.9% annual expansion recorded the previous month, data from the Central Statistical Bureau (CSB) showed on November 30.

October marked the 23rd month in a row in which sales expanded, a positive sign for economic growth. 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 October, compared to a m/m fall of 0.6% 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 CSB announced, also on November 30. 

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 September remained broad, with most segments expanding. Overall, sales of non-food products excluding automotive fuel increased 6.3% y/y, while food sales gained 4.5% against annual growth of 7.4% and 5.7%, respectively, in September.

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.