Consumption in Croatia Increased for the Fourth Consecutive Month in July

In Croatia, retail consumption increased for the fourth consecutive month in July on a year-on-year basis, and at a faster rate than the previous month, indicating stable economic growth at the beginning of the third quarter.

The Croatian Bureau of Statistics (DZS) published a report on retail trade on Wednesday, and according to seasonally adjusted data, consumption in July increased by 0.4 percent compared to the previous month, while it strengthened by 2.9 percent compared to July of last year.

Thus, retail consumption on a year-on-year basis increased for the fourth consecutive month, and at a faster rate than the previous month, when the growth was 2.2 percent.

At the same time, the turnover from the sale of food, beverages, and tobacco products increased by 4 percent, while the turnover from the sale of non-food products, excluding motor fuels and lubricants, decreased by 1.2 percent, according to DZS data.

In the first seven months of this year, retail trade turnover increased by 1.9 percent in real terms compared to the same period last year.

As consumption is the largest component of gross domestic product (GDP), the growth in retail trade turnover in July indicates a continuation of stable economic growth at the beginning of the third quarter.

On Tuesday, DZS announced that in the second quarter of this year, GDP increased by 2.7 percent year-on-year, slightly slower than in the previous quarter, but this marks the 10th consecutive quarter of economic growth.

– The continuation of solid demand was also indicated by data from the Tax Administration on fiscalization, where a continued increase in the value of issued invoices was recorded. In addition to still relatively high price growth, strong double-digit annual growth rates in the value of fiscal invoices were certainly supported by tourist consumption. Observed on an annual basis, the improvement in consumer optimism acted in the same direction, while a slight deterioration was recorded on a monthly basis. The deterioration in optimism compared to June, along with a modest monthly retail growth rate, indicates caution and suggests the presence of limiting factors despite stronger tourist activity – emphasize analysts from Raiffeisen Bank.

Persistent Inflation and Economic Uncertainty

On a monthly basis, the turnover from the sale of food products increased by a real 0.5 percent, while the turnover from the sale of non-food products (excluding motor fuels and lubricants) recorded a decline of 2.9 percent.

According to original indices, nominal turnover is up by 12.3 percent compared to July 2022, with the strongest growth recorded in the trade sector of Motor Vehicles, Parts and Accessories for Motor Vehicles, Motorcycles and Parts, with a turnover increase of 44.3 percent and an impact on the overall turnover index of 1.3 percent.

With an annual growth of 15.2 percent and a share in total turnover of 40.3 percent, the trade sector of Non-specialized Stores Mainly Selling Food Products had the greatest impact on the overall index (6.1 percent). Growth in turnover on an annual and monthly basis was recorded in nine trade sectors, while two trade sectors recorded a decline.

Cumulatively, from January to July, the average real growth rate was 1.9 percent (seasonally adjusted data).

– The continuation of favorable trends at the beginning of the second half of 2023 certainly reflects the easing of inflationary pressures, favorable developments in tourism in the central part of the tourist season (July), and growth in nominal as well as real wages, along with a still strong labor market. As a limiting factor for consumption, the persistence of inflationary pressures and ongoing economic uncertainty can certainly be highlighted, which leads to delays in consumption of certain (durable) goods. This will also be reflected in retail trends for the remainder of the year – conclude RBA analysts.