Czech real retail sales disappoint

Czech real retail sales rose 2.6% year-on-year in September yet fell 0.2% from the preceding month. The reading was well below what market analysts had expected. That said, the main drags on the overall annual performance were falling sales in stores selling computer and communication equipment, as well as clothing and footwear, and somewhat weak sales in specialised food stores.

Real retail sales have been muddling through in stagnation mode since April, as evidenced by the levels, which is not a sign of a confident consumer. We are wondering whether an end-of-year rally will materialise as people start preparing for Christmas. Our stance is that spending will accelerate as households channel their solid income and savings into comfort purchases during the darker, colder months. Real retail sales have already surpassed their pre-pandemic levels in a booming economy but are still below the peak of pent-up demand seen in 2021.

Summa summarum, given a rather well-positioned economy and solid nominal and real income gains so far, we believe that spenders can do better than in the stagnant third quarter. On the other hand, the continued standby mode of the industrial base, with its ongoing layoffs, may dampen consumers’ willingness to spend. Which force will prevail remains to be seen. For now, we continue to bet on a happy ending, with retail sales making a comeback in the fourth quarter.