Stagnation of trade and decline in industrial production in the first quarter on a year-on-year basis

According to data released today by the State Bureau of Statistics, real retail trade turnover fell in March on both a monthly and annual basis. Compared to February, the total seasonally and calendar-adjusted retail trade turnover was lower by real 0.9 percent, while compared to March 2022, the calendar-adjusted turnover fell by 1.3 percent. Thus, after two months of growth, the annual change in real retail trade turnover returned to negative territory and was the lowest since December 2020. Besides the base effect, this is a consequence of relatively strong inflationary pressures that continue to reduce disposable income and significantly affect consumer sentiment, as noted in the Economic and Financial Research by Raiffeisenbank.

On a quarterly basis, from January to March 2023, the calendar-adjusted turnover remained unchanged compared to the same period in 2022, while compared to the previous quarter, it was lower by a real 0.4 percent (seasonally and calendar-adjusted).

On a monthly basis, the turnover from retail trade in food products fell by a real 3.1 percent, while the turnover from retail trade in non-food products (excluding motor fuels and lubricants) increased by 3.7 percent.

Compared to March 2022, the real turnover from retail trade in food, beverages, and tobacco products decreased by 3.2 percent, while the turnover from retail trade in non-food products (excluding motor fuels and lubricants) increased by 1.7 percent, as analyzed by RBA.

According to the original indices, nominal turnover is up by 12.1 percent compared to March 2022, with the largest contribution to the increase coming from the trade sector of Non-specialized stores predominantly selling food, with a turnover increase of 14.5 percent and an impact on the overall turnover index of 5.1 percent. This is followed by the trade sector of Motor vehicles, parts, and accessories for motor vehicles, which increased by 56.6 percent overall, but its impact on the overall index is only 2.2 percent, and Other non-specialized stores that grew by 25.3 percent, with an impact on the overall index of 1.7 percent.

– In the first quarter of 2023, the environment continues to be characterized by strong, albeit weakened inflationary pressures, while consumer optimism, despite improvements in the first two months of 2023, fell again below the average long-term value during March. This will also reflect on retail trends for the remainder of the year. Nevertheless, for the entire year of 2023, we expect an average growth rate slightly above 1 percent – estimate RBA.

Industrial production in March 2023 continued to record positive monthly changes but also a decline on an annual basis for the fifth consecutive month. Specifically, the volume of industrial production compared to the same period in 2022 fell by 0.7 percent in March. Compared to February, seasonally and calendar-adjusted industrial production achieved a growth of 1.2 percent.

On a quarterly basis, in the first quarter of 2023, a real decline in industrial production of 1.7 percent was recorded compared to the same period in 2022, while on a quarterly basis, a growth of 1.4 percent was recorded.

The manufacturing industry, in the period from January to March 2023, fell by 2.2 percent compared to the same period in 2022. The decline during this period was contributed by, for example, declines in the production of chemicals and chemical products by 29.1 percent, in textile production by 22.6 percent, in the production of computers and electronic and optical products by 19 percent, and in the production of tobacco products by 16.5 percent, as well as in furniture production where the decline was 15.9 percent. Growth was recorded in only 11 out of a total of 24 activities in the manufacturing industry.

– In the outlook for this year, negative risks prevail as industrial production continues to be under pressure from still high input costs, supply-side constraints, and reduced demand (the trend of slowing demand for industrial goods began at the end of 2022 in the largest economies) and economic uncertainty. For the entire year of 2023, the growth rate of industrial production volume will slow down compared to the 1.6 percent achieved in 2022 – conclude RBA research.