Faster than Expected: Consumption Increased by 3.2 Percent, 16th Consecutive Month

In Croatia, retail trade turnover in November increased in real terms by 3.2 percent compared to the same month last year, which is significantly faster growth than expected and marks the 16th consecutive month of rising consumption.

The Croatian Bureau of Statistics (DZS) published on Thursday its first estimate indicating that retail trade turnover, achieved by all business entities engaged in this activity regardless of their primary activity, nominally increased by 2 percent in November, while in real terms it rose by 3.2 percent compared to the same month last year.

This is a faster growth than a month earlier, when consumption strengthened by 1.5 percent year-on-year, and significantly higher than anticipated.

Four macroeconomists who participated in the survey expected an average consumption growth of 1 percent in November, with their growth estimates ranging from 0.7 to 1.2 percent.

Moreover, this marks the 16th consecutive month of year-on-year consumption growth, a trend not recorded since 2007, two years before the onset of a six-year recession.

“Retail turnover has exceeded expectations. We expected a somewhat weaker result than in the previous month, primarily due to the political cycle, but also due to a somewhat higher base in November and December last year,” says Alen Kovač, a macroeconomist at Erste&Steiermaerkische Bank.

He added that low inflation, the sustained favorable trend in consumer confidence, and changes in income tax at the beginning of this year continue to have a positive effect on net wages.

“Overall, this retail data for November is a positive surprise, suggesting a somewhat stronger contribution of personal consumption to GDP growth in the fourth quarter than in the third,” notes Kovač, who also expects continued consumption growth in December.

The strengthening of personal consumption was one of the most significant reasons why gross domestic product (GDP) grew by 2.8 percent year-on-year in the third quarter, the highest since the second quarter of the pre-recession year 2008.