Sales in stores fell by almost seven percent in May compared to last year, i.e. the most in the European Union. According to some bank analysts, this may be the first turning point that reveals that the domestic economy is entering another recession. However, Petr Gapko from Moneta Money Bank allays concerns by saying that the Czechs may have only limited their current consumption in order to have time for the holidays.
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People spent 8.1 percent more in retail this May than a year ago, reports the Czech Statistical Office (CZSO). However, a significant part of the money was absorbed by inflation, which is why they received 6.9 percent less goods for more money. “Real sales decreased year-on-year in May in all assortment groups of stores, except for pharmaceutical and drugstore goods,” explained Jana Gotvaldová, head of the trade statistics department. Data from her office shows that in the last two decades, trade performance has fallen more only after the announcement of the lockdown in March and April 2020.
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“After all, the results correspond to the very negative sentiment of households, which has been at the lowest levels since 1998,” says Jakub Seidler, an analyst at the Czech Banking Association.
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David Vagenknecht from Raiffeisen Bank is convinced that something is breaking in the economy: “The decline in retail activity was expected, but it came more suddenly,” he said. According to the already quoted Petr Gapek, the balance sheet of the retail trade is proof that the entire economy has hit the brakes.
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The reason is primarily the conservative attitude of the Czechs, who prefer to save money instead of spending it.
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The May year-on-year decrease in the Czech Republic was the largest in the EU. The closest to the negative results here are the states of northwestern Europe, including neighboring Germany and Austria. In the European Union as a whole, however, the drop in retail sales was not significantly reflected, especially thanks to massive spending in the east and south of the continent. If the Czechs were bothered by the extraordinary increase in price, higher prices were not an obstacle for the Baltic nations, Poles or Hungarians.
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The year-on-year comparison has the disadvantage that it compares current spending with last year, which was still affected by the pandemic. A comparison with the pre-covid year 2019 offers a better overview. It also shows that the Czech customer is one of the most cautious in Europe. In May 2022, he bought 1.3 percent more goods than three years ago. Only the Spanish, whose economy was hit the hardest by the pandemic, were more frugal, while Slovenian and Polish retailers increased real sales by more than a quarter.
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The unusual trend of the Czech Republic was explained by Petr Dufek from Creditas Bank. “Retail normalized after the covid pandemic last May and June when IKEA and other large stores opened. But it has been slowly decreasing since then,” he said. The reason is primarily the conservative attitude of the Czechs, who prefer to save money instead of spending it. At the same time, real wages did not rise fast enough after covid for local households to abandon their usual caution. The extraordinary increase in prices in some sectors also discourages purchases. Even more expensive than other goods are cars, the European record for price growth is held by Czech restaurants and clothing and footwear stores.
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According to Petr Dufek, the somewhat deeper drop in May can be explained by the fact that the population’s purchasing power has already declined. “It’s clear that it will continue to decline,” he predicts.
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