Retail sales growth speeds up to 6.8% y/y in Slovakia

Growth of retail sales (excluding motor vehicles) rebounded again growing by stronger 6.8% y/y in August after the 4.9% y/y increase reported in July, according to the latest figures of the stats office published on Wednesday. The accelerating retail sales growth bodes well with the improving in the month consumer sentiments. Given the latter’s marked improvement in September as well as the continuing to improve conditions on the labor market, namely falling unemployment, growing job creation and robust wage growth, we may expect retail sales growth to remain quite robust going forward and thus household consumption to remain main economic growth driver. The retail sales growth in August was driven by all subcategories safe for sales in stalls and markets. The paces of expansion of food, fuel and ICT sales accelerated significantly in the month, thus supporting the headline print stronger value as well.

By contrast, the pace of expansion of retail sale and repair of motor vehicles eased to 9.6% y/y in August from 10.6% y/y in July on the back of growing at a slower pace sales of cars, which could not be compensated by the growing at much more robust pace repairs and maintenance of motor vehicles. Car sales expansion may be expected to continue going forward along with the overall improving sentiments, better situation on the labor market and increasing wages (also in view of increasing labor shortages), thus continuing to support the expansion of automotive industry, hence the entire manufacturing sector and country’s exports in the upcoming months, and ultimately, the economy’s expansion. Note that the Slovak Automotive Industry Association ZAP expects that the number of cars that will be produced this year in the country could exceed 1mn units again after the three car makers in the country turned out 1.04mn vehicles in 2016. The 1mn-level is likely to be even strongly exceeded in 2018 when the new car plant of Jaguar Land Rover is planned to launch operations.

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