Macroeconomics: Consumption Growth Expected for the 41st Consecutive Month

The State Bureau of Statistics (DZS) will publish on Friday the first estimate of retail trade turnover for January, and a continuation of consumption growth is expected for a record 41st consecutive month, and at a faster rate than the previous month.

Three macroeconomists who participated in a Hina survey expect an average consumption growth of 2.9 percent in January compared to the same month last year. Their growth estimates range from 2.7 to 3.0 percent.

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If the estimates are realized, it would be a faster retail growth than a month earlier, when it strengthened by 1.4 percent year-on-year.

This would continue the record trend of positive movements, given that the last recorded year-on-year decline in consumption was in August 2014.

Consumption growth for 41 consecutive months has not been recorded since DZS has been keeping these data.

“During January, we expect an acceleration in retail turnover growth, considering that changes in excise duties for the purchase of motor vehicles postponed part of the sales from the end of last year to the beginning of this year. High consumer optimism and the continued growth of net wages indicate further growth in household consumption,” states one of the macroeconomists in the Hina survey.

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The growth in consumption is attributed to the trend of wage increases that has been ongoing since the beginning of 2015, when tax changes on income were introduced.

And new changes in income taxation, which came into effect at the beginning of 2017, further stimulated wage and consumption growth, say macroeconomists.

According to recently published data from DZS, the average net wage paid per employee in legal entities for December last year was 5,973 kuna, which is a real increase of 1.1 percent compared to a year earlier.

Retail data is important as it will show how strongly personal consumption, the most significant component of gross domestic product (GDP), is growing at the beginning of this year.

Recently, DZS announced that in the last quarter of last year, GDP growth slowed to 2 percent year-on-year, while in the previous quarter, growth was 3.3 percent.

The economy has been growing for 14 consecutive quarters, but the GDP growth of 2 percent in the last quarter of last year was the slowest since the second quarter of 2015.