Romania’s retail sales index increased by 6.4% y/y in May, not far from the 6.5% y/y advance in April and in line with the same (+6.4%) average performance in Q1. 

Income convergence to average EU levels will keep pushing up Romania’s retail sales at robust rates in the coming years, albeit lower than the double-digit performances seen in 2016-2017 when they soared by a combined 22%.

In seasonally-adjusted terms, the retail sales index went up by 2.1% m/m in May, consolidating the gains in the previous two months (2.1% in April, 1.0% in March) after the decline seen in January-February when consumer sentiment was severely hit by changes in the income taxation system and lower-than-expected wage hikes in the public sector. But the fundamentals, as well as the expansion of modern retail chains, keep pushing up retail sales. The invigoration of the seasonally adjusted sales index in April-May coincides with the opening of new outlets after fewer such events took place during the winter.

Annual growth of private consumption, however, eased this year starting with February-March (4%-5% y/y) to the weakest rates since Q2, 2015 — after nearly three years of double-digit growth rates fuelled by wage hikes, low interest rates and positive consumer sentiment.

To different degrees, all these drivers have deteriorated: wages eased from the double-digit rates in 2017, interest rates returned to normal values from the abnormally low readings over the past couple of years and, most importantly, consumer sentiment is deteriorating significantly faced with the political turmoil and the weak performance of the public administration in regard to the infrastructure projects and the use of structural funds made available under the European Union budget.