Romania resumed consumption boosting – a key component in GDP production – with a new peak in July, when it once again ranked first in Europe in terms of increase rate. However, this ranking comes at a cost: Romania is also first concerning trade deficit, seeing as we produce much less than we consume, and the difference is visible in imports.
Moreover, we consume from the future: that is, we are talking about a boom in terms of population’s consumer loans.
Retail sales, defining the final consumption of households, remained at high levels, going up 1.9% in July (MoM) and reaching a 10% increase (YOY), according to NIS.
The main factors boosting consumption:
- a significant increase of real wages
- accelerated growth of the population’s consumer loans
- lower unemployment rate in the first half of 2024
The strong advance of consumption, predicted by economic analysts, will ultimately lead to a GDP growth in line with forecasts.
Food trade turnover in July was almost flat (+0.1%) against June and 5.7% higher against the same month of last year.
In terms of non-food products, the increase was more noticeable, of 1.9% against June and 13.3% higher year-on-year.
Fuel sales went up 4.4% against June, before the announced increase of excise duties, and up 10.2% year-on-year.
We consume from the future: More relaxed consumer loans – one of the main growth pillars
Consumer loans contracted by the population are currently going up at a double-digit annual rate, driven by the 0.25 percentage points reduction of the benchmark interest rate applied by the National Bank and the decrease of commercial bank interest rates for new loans compared to 2023, as well as the relaxation of lending standards generated by fierce competition among commercial banks.
The steep rise in lending amid easing interest rates is shown below:
The average value of the consumer confidence indicator in the interval January-July 2024 was much higher against January-July 2023 – according to Erste Bank analysts.
In the first six months of the year, the volume of retail trade turnover (adjusted according to the number of working days and seasonality), recorded an annual increase of 7.0% overall, due to an increase in non-food products sales (+11.8%), in motor fuels retail trade (+4.8%) and in food products sales (+3.2%).
Consumption increase of recent years has also increased trade deficit – we are massive consumers of foreign goods
Boosting consumption goes hand in hand with trade deficit, which is growing in parallel with consumption.
Romania, biggest consumption boost in the EU
In June, retail trade in the Euro zone dropped 0.3% and 0.1% at EU level, according to the first estimates of Eurostat, the statistics office of the European Union.
Most countries recorded sales declines, while Romania and Bulgaria recorded the highest increases in the EU, with Bulgaria still far behind Romania.
In the EU, retail trade volume decreased in terms of food, beverages, tobacco by 1.0%, remained stable regarding non-food products (excepting motor fuel), and went up 0.6% in the case of motor fuel sold in specialized stores.
The volume of retail trade in the Euro zone, dropped in June 2024, against May 2024, in terms of foodstuff, beverages, tobacco by 0.7%, non-food products sales decreased by 0.1%, while motor fuels sales went up 0.5%. Among member states with available data, the largest monthly decreases in total retail trade volume were recorded in Croatia (-2.7%), Austria (-2.3%), Latvia and Lithuania (both -1 .7%). The biggest increases were noted in Romania (+1.8%), Bulgaria (+1.4%) and Denmark (+1.0%).
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