According to a new Erste Group report, retail sales experienced a notable uptick in November, surpassing expectations and painting a brighter picture for the new year. Recent data show that retail sales surged by 1.7% month-on-month (m/m) and 3.3% year-on-year (y/y) in November, marking a significant acceleration from the 1.4% m/m and 1.9% y/y figures recorded in October. This notable increase managed to exceed the forecasted +0.5% m/m and +1.6% y/y, showcasing a robust performance within the sector.
Projections for the upcoming year are equally optimistic, with forecasts suggesting a substantial rebound in retail sales for 2024. Estimates indicate a prospective increase of 3.9% in 2024, a significant improvement from the estimated 2.3% in 2023. This positive trajectory is anticipated to be supported by an expected strengthening in real wage growth, projected to reach a five-year high in 2024.
Factors contributing to this anticipated growth include a projected slowdown in inflation rates coupled with substantial increases in nominal salaries. The current employment landscape is also playing a pivotal role, with the number of employees in the economy at an all-time high, albeit with a slower growth pace, while the unemployment rate remains relatively stable.
A breakdown of the sales performance across various sectors reveals intriguing insights. Food sales remained steady at 0.0% m/m and exhibited a healthy 4.3% y/y growth. Non-food items witnessed a substantial boost in turnover, primarily attributed to the sales influx during Black Friday, resulting in a robust 3.9% m/m and 6.5% y/y growth. However, sales of car fuel experienced weakness with a decline of -0.2% m/m and -5.7% y/y, while online sales notably dropped by -3.4% y/y.
Despite the surge in sales, the overall sentiment in the retail trade sector experienced a nuanced shift. The Economic Sentiment Indicator (ESI) survey reported a downturn in the expected business situation for retail trade in November. However, a contrasting improvement in the backward-looking component slightly mitigated this decline. The overall retail trade confidence indicator took a hit primarily due to increased inventories weighing down on sentiment during the same period.
Encouragingly, the revival of new retail loans, a significant driver for durable goods sales, showcased recovery during the latter half of 2023. This revival was propelled by declining interest rates, hinting at a potential contributor to the sector’s future sales performance.
As retail sales continue to display resilience and promising growth prospects, the sector remains poised for a potentially prosperous trajectory in 2024. The confluence of factors, including wage growth, employment stability, and evolving consumer trends, sets the stage for an encouraging outlook, providing stakeholders with a positive narrative amid economic fluctuations.
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