CZ: Slight slowdown in retail sales

In November, the Czech economy experienced a slight decline in retail sales by 0.1% month-on-month. This data is slightly below our expectations, as we anticipated a modest increase of 0.2%. Year-on-year, sales were up by 4.3%, marking a slowdown of almost one percentage point compared to October, which was partly affected by historical data revision. Overall, however, today's data do not change our view of the retail sector's development. We continue to see its performance as favorable, driven primarily by the recovery in household consumption.

The retail sector's performance is expected to continue this year and next. In our forecast, we anticipate retail sales growth of 3.8% in 2025 and 3.7% in 2026. Sales growth is primarily driven by household demand, supported by labor market developments. Conversely, slightly elevated inflation and a moderation in wage growth are expected to slightly temper the growth of real sales.

Today's data do not change the pro-inflationary impact of the retail sector, which is expected to continue this year and next. From the CNB's perspective, nothing significant changes here, in our view. However, this does not apply to December's inflation data released also this morning, where the unexpectedly low figure (compared to expectations) could significantly increase the likelihood of a rate cut at the CNB's February meeting.