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Monday, March 31, 2008

Latvia Retail Sales February 2008

As in the case of Estonia, retail sales in Latvia experienced something of a rebound in February, with an increase in sales after two consective months of contraction (seasonally corrected figures), according to data out today from Latvijas Statistika. On a year on year basis sales were up by 1 percent in February, following a year on year contraction of 0.7% in January. Compared to the combined months of January – February 2007, in January and February combined retail trade turnover increased by 0.2%. I think here we should be thankful for small mercies, since the situation has consolidated rather, and not deteriorated further. However the increase was rather more moderate than the 4% year on year increase which took place in Estonia.

Apart from the general point which I made in the case of Estonia that, apart from noting the fact, we really need to wait a few more months to see where all this is leading before trying to draw any lasting conclusions, I also think that it is worth bearing in mind, as in the case of Estonia, that real wages (derived by subtracting the monthly rate of inflation from the rise in money wages) were still rising at an annual rate of 11.1% back in December (which is the last month for which we have data at this point), although as can be seen in the chart the rate of increase is decelerating rapidly (although again this is as much a by-product of the rapid acceleration in Latvian inflation as it is of anything else, since money wages were still rising at a 25.2% annual rate in December). So when we come to think about retail sales we should remember that for the time being people continue to have more money in their pockets, although as inflation comes under control this situation is almost certainly not going to last, and when it doesn't then that is when I think we will see the real impact on retail sales.

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