Romania’s retail sales index edged up 1% y/y in July after two consecutive months of a negative annual performance, the statistics office reported. The seasonally- and workday-adjusted index picked up 2.1% m/m.

Nonetheless, the slight improvement of retail sales in July is not reversing the sluggish dynamics visible over the past six quarters. Indeed, non-food sales have gained ground constantly over the past three years and are now over 10% above the benchmark mid-2010* level, but the overall retail sales index has stagnated over the past six quarters only marginally above the mid-2010 level.

The sluggish advance of wages, negative in real terms for the private sector, and the slow increase of the employment will predictably prevent any major improvement in the retail sales. The higher heating bills over the winter season, after the first steps toward natural gas price liberalisation, will rather put downward pressures. The consumer credit remains subdued and in any case insufficient for generating visible impact on the retail sales.

Notably, non-food sales advanced by 4.2% y/y in July and maintained the same robust positive dynamics seen in Q2. On the opposite, the sales of food items contracted by 1.1% y/y after a similar negative 1.3% y/y performance in Q2. The sales of car fuels remained in the negative area in July also, after losing momentum in Q1 and Q2.

* Romania’s government enforced a fiscal austerity package in mid-2010, including a 5pps VAT rate hike and a 25% public wage cut – with visible impact on retail sales.