RO: Mid-summer consumers’ lethargy

Retail sales delivered a negative surprise, dropping by -1.8% m/m, leading to a deceleration in annual terms to +7.4% y/y in July vs +9.4% y/y in June. Our forecast stood at +10.0% y/y. The data for June was revised downwards by the National Institute of Statistics.

We continue to forecast retail sales growth at +6.5% in 2024 vs +1.9% in 2023. Labour market is strong, with rapid growth of real wages and lower unemployment rate in the first seven months of the year. On the other hand, job creation slowed down in recent months as hiring in manufacturing came under pressure.

Food sales dropped -1.0% m/m and increased +5.0% y/y, turnover for non-food items was up +0.3% m/m and +12.3% y/y, while sales of car fuel dropped -9.2% m/m and -0.2% y/y after an increase in excise duty which prompted drivers to fill their tanks at the end of June.

Retail trade confidence dropped in August as managers were less optimistic about past and expected business situation.

Consumer confidence improved in August and remained above the long-term average. Romanian households are more willing to purchase big-ticket items in the next twelve months and they are more optimistic about the general economic situation.

Consumer loans are strong at present, helped by a drop in interest rates for new loans in recent quarters due to high liquidity surplus in the banking sector. Easing credit standards for consumer loans in 2Q24 due to tough competition between banks boosted lending activity additionally. Credit standards could be eased further in 3Q24 according to the NBRs Bank Lending Survey.