Despite the intensification of the recession narrative, consumers continue to spend their money and retail sales are showing resilience. But not all countries are the same, with the US showing still strong figures but in the EU some countries are having big increases in numbers while others are showing steep decreases, writes eToro analyst for Romania, Bogdan Maioreanu.
Romania is in a very select group of European Union countries that were showing an increase in retail sales in March. This is good news for the Romanian economy too because consumption is 66% of GDP. With a 6.7% year on year increase it was the third largest in EU after Spain with 9.5% and Ireland with 8.6%. The EU was showing a 4.1% decrease with the Euro area at -3.8%. At the opposite end of the spectrum Hungary showed a 13.1% decrease in Retail sales year on year.
Across the ocean, consumption, which dominates the US economy, at 2/3 of GDP, is showing resilience. This is the biggest reason the US economy it’s not in recession. The good news is consumers still have significant pandemic savings and less inflation will return purchasing power. Retail industry forecasts are for a small deceleration from last year’s 7% retail growth to a still above average 4-6% rate.
But not all sectors will grow at the same pace. Non-store and online sales, which are included in the total figure, are expected to grow between 10% and 12% year over year to a range of 1.41 trillion to 1.43 trillion dollars. The role of brick-and-mortar stores has evolved in recent years and they remain the primary point of purchase for consumers, accounting for approximately 70% of total retail sales, according to the US Retail Federation (NRF).
The data is showing that consumers are spending differently. Personal care and groceries staples along with luxury are growing. Online is seeing structural market share gains. According to NRF, US April retail sales rose 0.4% from March and 1.6% year on year. Online and non store sales went up 6.4% year over year. According to NRF’s calculation of retail sales – which excludes automobile dealers, gasoline stations and restaurants to focus on core retail – showed April was up 0.6% from March and up 2% unadjusted year over year. Health and personal sales care went up 5.8% and general merchandise stores 4.1%. Largest decreases were in sporting goods stores with 9.9% year over year, followed by furniture and home furnishing stores and electronics and appliances down over 8%. Grocery and beverage stores were down 0.2% month over month seasonally adjusted but up 2.9% unadjusted year over year.
One explanation for this resilience might come from the estimated pandemic savings boom of 2.1 trillion dollars, equal to 8% of GDP. Three quarters of these savings have now been spent down. But an estimated 500 billion dollars remains, with liquid savings higher than normal across all income levels. This is enough to support the consumer at least until the end of this year. For investors this is good news because it is a key buffer to the mounting macro and jobs market headwinds. _
