May retail data show that the economic path out of the pandemic is wavy and winding. In April, the sector exceeded pre-pandemic levels for the first time, but in May it rebounded and the total real turnover was again 2.5% below the February 2020 level in terms of adjusted data. The turnover of stores was 3.2% higher than a year ago, but this indicator is still “helped” by the very favorable base effect, which will have almost disappeared in June. In other words, as the plane flies over the mountains, the earth sometimes approaches, sometimes moves away, a similar effect on the data on an annual basis is caused by the echo of the first wave of the pandemic.
Compared to April of this year, the turnover of stores decreased by 3.9%, which follows a sharp increase in the previous three months. Food sales decreased by 2.1%, which can be partly explained by increasing opportunities to eat outside the home. Trade in household goods decreased by 11.0%. Mail and internet sales fell 4.0%, following a decline of 13.0% in April. In May, in some stores, such as household and construction goods stores, the effect of the wave of deferred purchases in the winter had apparently already abated rapidly, while in other stores the restrictions had not yet been lifted. One of the sectors hardest hit by the pandemic is the clothing trade, which was still in the red on an annual basis in May (-15.9%) and lags behind the pre-pandemic level by about a third. Last May, large shopping centers were open, albeit with restrictions.
It is expected that the data on trade turnover in June will be more encouraging due to the change in regulation – the large centers were able to resume operations on June 3. But you can’t count on a sharp jump. Consumer and trader sentiment has improved in June, but only slightly. In addition, although retailers are rather optimistic about changes in demand in the near future, this indicator has slightly decreased in June compared to May. Consumer expectations about the economic situation in the near future, as well as the expressed desire to make large purchases, are still below the historical average optimism.
Looking ahead to the coming months, the risks to the industry are significant. With such a low level of vaccination, the prevalence of coronavirus may increase at any time, as the proportion of Covid-19 delta (Indian) virus in Latvia has reached 15%. The general public, which has been unable to make a rational decision on vaccination, threatens to increase welfare. How can this news affect the operation of stores in the near future? Some people will try to buy what they need while it is still possible. However, concerns about another wave of pandemics may also lead to a more cautious approach to money, as the income of some service workers could once again be jeopardized.
The data suggest that the recovery of the Latvian economy, which in general suffered less than the average European economy in the pandemic, will be gradual in the near future. Business and consumer sentiment is improving relatively slowly. The economic sentiment index (ESI) in the euro area is 117 points, which could be called the level of ecstasy, as it is only 0.7 points behind the historical maximum. In Germany, Belgium and Austria, a record of positivism was reached in June. Italy and France are also quite optimistic, despite the difficulties of tourism. The mood is relatively cautious in Central European “car” economies, such as Slovakia and Hungary, which are heavily dependent on vehicle production. In Latvia, the overall mood index is moderately optimistic (105.6 points), which is also the case in retail, where it is slightly above the historical average, but lags far behind the records, the same can be said about the consumer sentiment index.