Estonian Retail Sales Decline in March 2008

Estonian retail sales contracted in March when compared with March 2007, the first contraction since at least 2001, suggesting the Baltic economy may face a much more abrupt slowdown than may had been anticipating. Retail sales excluding cars and fuel declined an annual 4 percent, compared with a revised 6 percent rise in February. Sales including cars and fuel last showed a decline in November 1998, according to the statistics office database.

Clothing sales declined an annual 19 percent and sales of household goods fell 12 percent. Food sales remained unchanged, the office said.Estonian economic growth, which had been largely driven by a surge in wages and borrowing which lead to large increases in consumer spending and property investment, slowed in the fourth quarter of 2007 to a near six-year low of 4.8 percent. The central bank on April 16 forecast growth of 2 percent for 2008, expecting a contraction in the fourth quarter, while AS Hansapank, the biggest Baltic lender, forecast yesterday 2008 growth at 3.5 percent.

``Even before today's data, any hopes of a quick recovery in the second quarter looked unrealistic. Now they must have faded altogether,''
Neil Shearing, analyst at Capital Economics

Basically domestic Estonian demand is now in full retreat, government spending is having to be cut because of the "no deficit" rule, and the only positive note is exports, which means that Estonia is now ultra-dependent on the magnitude of the developing slowdown in the other EU economies.