After a sharp decline in sales in January and February, retail sales in Latvia have improved, although activity in the sector is still limited. According to information published by the Central Statistical Bureau, retail trade turnover in February increased by 4.4% compared to January, according to seasonally adjusted data.
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At the same time, in annual terms, retail trade continued to decline significantly and, compared to February 2020, trade turnover in Latvia at constant prices decreased by 8.5%. However, our customers’ credit card turnover data suggest that sales in Latvia continued to improve in March and the industry may even return to positive annual growth, as the first wave of the Covid-19 pandemic began in mid-March, followed by a drop in sales.
In February, the increase in trade turnover compared to January was definitely facilitated by the expansion of the range of goods traded in grocery stores. As a result, retail sales in grocery stores increased by 1.7% compared to February 2020. In addition, fuel sales grew by 5.2% in February, as did electrical and internet sales, which grew by 20% and 20.5% respectively in February. Meanwhile, the largest decline in February was observed in trade in clothing and second-hand goods, where turnover decreased by 63.8% and 94.4%, respectively.
Although trade volumes have decreased, the income of the Latvian population continues to grow and household deposits with banks are growing rapidly. In January, household deposits in Latvia increased by 14% compared to January 2020. This is because the losses caused by the restrictions are at least partially offset by an increase in the government deficit, for example by significantly improving the regulation of downtime benefits and current assets. As a result, trade is currently experiencing significant potential for deferred consumption, which will also be facilitated by the government’s decision to pay lump sums to pensioners and families with children.
Also, despite the constraints, the economy is not standing still, and businesses continue to adapt to the new situation, both by expanding online sales and by creatively interpreting and applying the restrictions on trade. Our customers’ credit card turnover data show that sales in March continue to improve, which suggests that the sensitivity of the Latvian economy to restrictions is declining. However, this process is not smooth and there is undeniably a large redistribution of market shares within the retail sector, and support mechanisms for commercial space owners and tenants still seem incomplete.
Of course, restrictions on the trade sector are still significant, and in February the decline in trade in Latvia is likely to be significantly larger than the EU average. We are also currently significantly behind Lithuania in terms of trade, where in February the retail trade turnover was at the level of last year, although the incidence of Covid-19 there has decreased significantly faster than in Latvia.
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