Czech retail sales declined for the first time in seven months in May 2014 edging down by 0.6% y/y, data from the statistics office showed. The reading defied market expectations as analysts were forecasting a 3.1% growth after a 6% rise in April.

The annual drop was mainly influenced by the lower number of working days in May 2014 than in the same month last year, the statistics office said. 

On a working day adjusted basis, retail sales in the fifth month of 2014 expanded by 1.1% y/y but when adjusted for seasonal factors they shrank by 1.5% m/m, deepening from a 0.1% m/m decline in April.

After rising for 10 straight months auto sales contracted by 1.9% y/y in May following a 9.8% hike in April. Retail sales, including automotive fuel, also decreased but at the much softer pace 0.1% y/y erasing a 4.3% y/y gain the month before.

IntelliNews comment: Improving consumer confidence amid the recovering economy was supporting the rise in Czech retail sales in the first four months of the year. The slight fall in May should not be a concern as it is mainly due to calendar effects.

We expect retail sales in the county to increase in the months to come on the back of rising household consumption which should edge up by 0.7% in 2014 and gain speed to 1.9% in 2015, according to the European Commission’s spring forecast. Low inflation and rising real wages should also support the retail sales growth.