Moldova reports robust retail sales, but dwindling private consumption

Moldova reports robust retail sales, but dwindling private consumption
/ bne IntelliNews
By Iulian Ernst in Bucharest November 27, 2023

Moldova’s statistics bureau reported that the retail sales index (not including the car sales, chart) surged by 9.3% y/y in Q3, 2023 after it lost momentum to 2.3% y/y in Q2 — a meagre advance compared to the 21.5% increase in 2022.

Such bright sales figures are counter-intuitive since both the wages and the remittances to households have come under pressure since the beginning of the war in Ukraine.  They failed to serve as a proxy for private consumption, hence Q3 retail sales data can not be used for concluding a resurgence in private consumption. Wages and remittances are more correlated with private consumption.

Most likely, the bright sales figures are a result of the change in methodology from the “retail sales” until December 2022 and the “retail sales index, based on VAT reporting” from January 2023 (with a one-year history). Under the old definition, the retail sales contracted by 1.5% y/y in 2022 — which is in line with the detailed GDP data but in sharp conflict with the 21.5% y/y surge of retail sales under the new definition.

Real wages in Moldova were hit severely by the high inflation and stayed flat since Q1, 2022 at a level at least 10% below the peak reached before the war in Ukraine.

The remittances to the Moldovan households plunged dramatically when the war in Ukraine began, to recover only partly afterwards. Previously, around half of the remittances came from Russia.

Deposits, in banks or any other forms, apparently supported Moldova’s private consumption in 2022 and 2023 — but even this can’t explain such a massive surge as the 21.5% in 2022.

Detailed GDP data reveals that private consumption of goods contracted by 2.5% y/y and picked up by 3.2% y/y in H1, 2023.

As reported by the statistics bureau, retail sales surged by 21.5% y/y in 2022 and advanced by 8.2% y/y in H1, 2023.

The statistics office also estimates the sales’ growth rate at 9.3% y/y in Q3, 2023 — but this is hardly an indication that the private consumption recovered sharply in the third quarter of the year after it contracted in Q2. Wages and remittances data for Q3 is not yet available but no significant improvement was reported.