Romania’s retail sales volume index shrank by 1.4% y/y in August, reversing from the 1.2% y/y advance in July, the statistics office INS reported. The retail sales and generally the household consumption remain constrained by budget – but also by their caution regarding future earnings.

Rising heating expenditures this winter will predictably keep the private consumption’s dynamics in the negative territory for the quarters to come particularly as no improvement in the incomes or employment are expected.

The performance in Q3 might thus eventually remain in the negative territory after sales have narrowed slightly by 0.2% y/y in Q1 and more visibly by 1.8% y/y in Q2. The real wages have decreased marginally on the year in both Q1 and Q2, while indeed the employment improved slightly more consistently by around 3% y/y. Nonetheless, the service of the bank loans and particularly the uncertainty related to future revenues place visible pressure on household consumption.

Food sales index dropped by 2.7% y/y in August after narrowing by 0.7% y/y in July, indicating that households save on the expenses supposed to be the least elastic to wages. The sales of car fuels shrank even steeper, by 6.9% y/y, after they dropped significantly in each of the first two quarters of the year. After gaining ground in 2012 by 6.2% y/y, the car fuel sales lose ground again on consumer sentiment that has visibly deteriorated in 2013.