Lithuanian retail sales growth slowed down to an unadjusted 4.3% y/y in December at constant prices, Statistics Lithuania reported on January 26. Throughout 2017, growth came in at 4.6%, a drop of 2.4pp against 2016.

The reading marks a slowdown in retail sales expansion after sales shot up to the highest growth level since May in November. Fluctuations notwithstanding, shop turnover has now remained on an uninterrupted growth track since the start of 2015.

Sales grew 5.6% on the year on a working-day adjusted basis in December, adding 0.6pp to the annual expansion recorded in November. Month on month, sales grew an adjusted 0.8% in December, 0.4pp slower than the y/y growth rate in the preceding month. In unadjusted terms, sales jumped 19.1%, compared to a m/m fall of 2.2% previously.

An improving labour market and growing incomes remain drivers of retail turnover in Lithuania. On the other hand, a slowdown in consumption is likely over time, according to the European Commission. In terms of economic growth, however, the rebound in investment is set to compensate for slower turnover experienced by Lithuanian retailers.

Lithuanian GDP is expected to grow 2.9% in 2017 overall – although Fitch forecast a figure of as much as 3.3% in its recent rating update – with the expansion aided by the return of investment projects co-financed by the EU. 

Economic expansion came in at 2.2% in 2016, but growth picked up speed to an adjusted 4.1% y/y in the first quarter and 3.9% y/y in April-June. The third quarter saw the economy expand 3.4% y/y in adjusted terms.

December growth in retail sales owed to food, alcohol, and tobacco sales, which expanded 2.6% y/y on an unadjusted basis, 0.6pp faster than in November.

Sales of non-food items slowed down growth to 5.8%, from 6.7% y/y the previous month; sales growth of automotive fuels also decelerated to 4.6% y/y, from 6.1% in the eleventh month. In nominal terms, sales came in at €1.04bn in current prices in December.