Retail sales fell again in January, but the decline slowed to 7.7%

Retail sales fell again in January, but the decline slowed to 7.7%

Retail sales decreased again in January, but the decline slowed to 7.7%

Development of retail sales in the Czech Republic from January 2022 to January 2023.

Prague – Retail sales in the Czech Republic decreased year-on-year for the ninth month in a row this January. However, the decline slowed from December's revised 8.1 percent to 7.7 percent. This was announced today by the Czech Statistical Office (ČSÚ). Month-on-month sales in retail grew slightly, by 0.3 percent.

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“Lower sales were recorded by the sale of food and non-food goods. On the contrary, the sale of fuel in January showed year-on-year growth for the second month in a row,” said Jana Gotvaldová, head of the trade, transport and services statistics department of the CZSO. Sales of non-food products fell by 9.5 percent and sales of food by eight percent. On the other hand, merchants spent 1.7 percent more on fuel compared to last January.

Although January food sales were lower year-on-year, and fuel sales were higher, consumer prices rose year-on-year in both categories in January, according to earlier CZSO data on inflation. In the case of fuels and heating oils, the price increase was even less pronounced than that of food. It was 3.2 percent, while food and non-alcoholic beverages rose in price by 24.8 percent. Despite this, fuel sellers, unlike food sellers, were able to increase sales.

Sales for food fell by 8.8 percent in specialized stores and by eight percent in non-specialized stores with a preponderance of food. In non-specialized stores with a predominance of non-food goods, sales decreased by 0.6 percent. Sales of online and mail-order stores fell by 11.9 percent.

From non-food goods, sales in January decreased year-on-year, for example in specialized stores with household products by 14.8 percent, with products for culture, sport and recreation by a tenth, with computer and communication equipment by 3.7 percent, and with pharmaceutical and medical goods by 2 .6 percent. Conversely, sales in clothing and footwear stores increased by 5.8 percent and cosmetics and toiletry products by 1.8 percent.

The figure on retail sales does not include the sale and repair of motor vehicles. Year-on-year sales in this category increased by 1.2 percent. Of this, sales of motor vehicles, including spare parts, rose by 2.3 percent, while sales of repairs fell by 3.1 percent.

In a month-on-month comparison, sales grew overall. Sales of fuel rose by 2.5 percent. Food sales also rose by 1.7 percent. On the contrary, non-food goods fell by 1.1 percent. Revenues from the sale and repair of motor vehicles increased by exactly one percent month-on-month.

Analysts: Retail sales are affected by lower purchasing power, they will continue to decline

Retail sales are hampered by the declining purchasing power of households due to high inflation. People's real wages are also falling and they are saving more. This follows from analysts' comments on the January development of retail sales.

The Chief Economist of Creditas Bank, Petr Dufek, stated that the purchasing power of Czech households is still affected by high inflation. In January, consumer prices rose by 17.5 percent year-on-year. According to him, the slight month-on-month increase in retail sales in January can be attributed to purchases at discounts after Christmas. “Until the trend finally reverses and the real financial situation of households improves, it cannot be expected that retail sales could grow,” he added.

He also drew attention to the declining sales of online and mail-order stores, which fell by 11.9 percent year-on-year in January. Their sales have been decreasing for the thirteenth month in a row, which, according to Dufka, is related to the slowdown after the end of the coronavirus pandemic. According to BHS Chief Economist Štěpán Křeček, this is related to the fact that some customers returned to brick-and-mortar stores after the end of the pandemic. He expects that retail sales will continue to decline due to the reduction in real incomes of Czech households. “Smaller stores that have rising operating expenses but lack revenue from customers can get into trouble,” he noted.

Generali Investments CEE Chief Economist Radomír Jáč said that high inflation and a drop in real wages will affect retail sales at least in the first quarter of this year. “These adverse pressures may continue into the spring months,” he added. Cyrrus Chief Economist Vít Hradil said that instead of spending in stores, people have to pay for expensive energy or save. “While the average wage at the end of 2022 increased by less than eight percent year-on-year, nominal expenses increased by only about six percent,” he pointed out. According to him, traders are encountering the ability and willingness of customers to pay rising prices. “We would consider it a success in the retail sector if this year ended with a real drop of five percent,” he added.

According to economist Filip Pastucha from Deloitte, retail sales cannot be expected to improve in the coming months. “According to our model, we expect a drop in retail sales this year by 3.8 percent,” he said. The Chief Economist of the Czech Banking Association, Jakub Seidler, stated that although the January figures were slightly more favorable than at the end of last year, households will continue to limit consumption due to high inflation. “For the whole of this year, retail sales will probably continue to decline, by around 1.5 percent,” he added.