Surprise in June: Consumption Increased by 2.7 Percent

In June, retail trade in Croatia increased by 2.7 percent year-on-year, marking the second consecutive month of growth, exceeding expectations.

The Croatian Bureau of Statistics today published its first estimate indicating that retail trade turnover, achieved by all business entities engaged in this activity regardless of their primary business, nominally increased by 4.6 percent in June compared to the same month last year, while real growth strengthened by 2.7 percent.

This is significantly better than anticipated. Four macroeconomists who participated in a Hina survey expected an average consumption growth of 0.3 percent in June compared to the same month last year. Three of them expected growth up to 0.6 percent, while one anticipated a decline of 0.5 percent.

Retail trade turnover had been continuously declining since March of last year, before unexpectedly rising by 1.1 percent in May, with further acceleration in June.

“We expected consumption growth, but it is indeed higher than we estimated. The increase in the number of tourist arrivals and overnight stays in June positively influenced consumption, and the slowing growth of consumer prices also contributes to favorable trends in retail,” says Zdeslav Šantić, chief economist at Splitska Banka.

The growth in retail trade turnover was also aided by a low base, given that consumption had been continuously declining since March of last year.

Thanks to the growth in May and June, consumption could finally have a positive impact on gross domestic product in the second quarter, after a long time.

Although further consumption growth can be expected in the coming months due to the tourist season, its recovery is not anticipated soon due to labor market weaknesses and stagnant wages.

“We must be aware that the recovery of retail turnover is not yet in sight, as unemployment will continue to rise, and consumer optimism remains low, while households continue to deleverage. Therefore, we expect a more noticeable recovery in retail turnover only when somewhat more favorable trends emerge in the labor market,” concludes Šantić.

A more detailed report on retail trade turnover will be published next week.