SK: Higher Household Optimism Reflected in Retail Sales

In June, retail sales growth was below expectations. Retail sales increased by only 1.1% year-on-year in June. On a monthly basis, retail sales dropped by 1.1% after seasonal adjustment. This growth was mainly driven by e-shops and due to a lower comparative base from last year. In total, for the first half of 2024, turnover in retail trade rose by 3.8% year-on-year.

An increase was recorded in 4 out of 9 sub-categories of retail trade. The most significant category, sales in non-specialized stores (such as supermarkets), saw year-over-year growth of 2.3%, representing over 40% of the total retail turnover. However, the most notable impact came from a 21% increase in turnover from e-shops and mail-order sales. The overall retail balance was also positively affected by a 15% increase in specialized sales of food, beverages, and tobacco stores. The final retail value was dampened by a year-on-year decrease in gas station turnover (fuel sales), which dropped by 16.2% compared to last year, according to data from the Statistical Office of the Slovak Republic.

Retail sales and household consumption are supported by lower inflation and strong growth in nominal wages. The labor market is resilient, with low unemployment and high demand for skilled workers. This makes households feel more secure and improves their confidence. After two years of falling real wages, households are now in a better financial position, as shown by rising consumer confidence indicators. Consumer confidence has been growing in recent months, with people expecting further improvements in their financial situation and anticipating saving more money. This suggests that people will continue to have an appetite for spending.

On the other hand, households are using higher incomes to replenish their savings, somewhat limiting retail sales and total consumption growth. The increase in savings also has an anti-inflationary effect. We anticipate household consumption to be one of the main drivers of economic growth in Slovakia in 2024.