Bank of Estonia: Retail sales should start to grow in second half of 2022

A supermarket in Estonia.
A supermarket in Estonia. Source: Aili Vahtla/ERR

An 11 percent fall on retail volume on year to April reported by state agency Statistics Estonia may not be a trend continuing through the second half of 2023, a Bank of Estonia (Eesti Pank) spokesperson told ETV news show 'Aktuaalne kaamera' (AK).

A major reason for the fall on year to April was exit from the pandemic and its restrictions, meaning people were spending more and going to the store more in spring 2022, while the continuing release of funds from the second pillar of the Estonian pension system, and purchases of goods to be sent to Ukraine, also had their effects at that time.

Rasmus Kattai, economist at the Bank of Estonia, says that the current fall in retail sales derived from an exceptionally high reference base a year ago.

"Retail sales have returned to a level that is affordable for consumers in the long term. This is the rate of growth of the kind that we also saw before the pandemic," Kattai told AK.

"The fall seen compared with a year ago is largely due to the fact that the volume of retail trade was very high one year ago, around 15 percent higher than the usual level. This in turn derived from savings made during the pandemic and disbursements from the second pillar of the pension system, were in use," he went on.

The second pillar of the national pension system referred to employer/employee contributions, mandatory for most wage earners until membership was made voluntary from early 2021 onward.

Commenting on the results, Aare Koppel CEO of Euronics, a major electronics retailer in Estonia, said: "The largest decrease is in the ICT sector. This is also the result of the largest rise happening in the same period last year.

"The smallest fall was seen in white goods, ie. household appliances, large and small," he went on.

According to Rasmus Kattai, the goods bought to help Ukraine also played their part.

The Bank of Estonia spokesperson also said that the second half of this year should already bring a rise in sales volumes.

He said: "Most likely, the second half of the year will already see an increase in retail sales volumes. The main key factor here is people's real incomes; salaries as adjusted to price levels. If you consider the fact that people's reals have already risen by five percent in the last six months, and will continue to rise in the context of slowing inflation, then this will also provide a further boost to consumption and retail sales."

Mail order and internet sales fell the most on year, by 24 percent, according to Statistics Estonia.

Aare Koppel said however that a big difference had not been seen at Euronics, though there had certainly been a fall in e-commerce there too.

This is likely also to relate to the end of the pandemic.

A smaller fall in retail sales, of 6 percent, has hit both grocery stores and gas stations over the past year.

Product selection and procurement director at Prisma, Kaimo Niitaru, said: "On average, there has been a 5 to 7 percent fall in retail volume both in fresh products and in dry ingredients. Whereas half a year ago the tone was set by the fact that the fall in volumes of fresh products was greater, now I would say that it has stabilized."

Inflation in 2022 hit fresh produce in particular.

Statistics Estonia reported earlier in the week that turnover of retail trade enterprises fell by 11 percent on year to April 2023, to €844 million in total.


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Editor: Andrew Whyte, Merili Nael

Source: 'Aktuaalne kaamera'

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