RO: We revise upwards our forecast for retail sales in 2024

Retail sales were up +0.9% m/m and +10.6% y/y in October, above our forecast of +9.8% y/y.

We revise upwards our forecast for retail sales growth to +8.2% in 2024 from +6.5%. We see next years retail sales growth at +4.5% with risks to the downside due to gradual shift towards prudent fiscal policies after elections. Real wage growth will decelerate in 2025 and could stay in mid-single digit territory.

Food sales increased by +1.5% m/m and +5.2% y/y, turnover for non-food items went up +0.9% m/m and +18.9% y/y, while sales of car fuel dropped by -0.4% m/m and slowed down in annual terms to +2.2% y/y.

Consumer confidence came at -8.9 in November vs -12.1 in October, the highest level since the post-Covid recovery in mid-2021. Financial situation of households over the past twelve months came close to all-time high after strong increases in pensions and wages. On a less positive note, future financial situation deteriorated slightly.

Retail trade confidence increased to 12.6 in November from 12.3 in October as past business situation was assessed as stronger in contrast to a decline in expected business developments.

Consumer loans are strong at present, helped by easing credit standards and a drop in interest rates for new loans in recent quarters due to high liquidity surplus in the banking sector.

Households financial assets increased marginally as percentage of GDP in 2Q24 vs 4Q23 after a post-pandemic drawdown in 2022-2023. The increase from the first half of 2024 was driven by investment funds, listed shares and cash, while deposits and bonds were unchanged as percentage of GDP. The growth in financial assets is smaller than in other CEE countries which suggests that Romanian households can cope with slower growth in real income in 2025 but a deceleration in private consumption is hard to avoid.