Central and Eastern Europe (CEE) is seeing a mixed picture in the trends of retail sales as the region comes out of mid-May and through June. We see particularly significant progress in Hungary, Romania and Slovakia. Though Hungary’s retail sector is returning to the strong growth seen in 2024, Romania is struggling under the weight of fiscal consolidation. As June progresses, the region looks forward to major economic news such as inflation reports and interest rate announcements.
Perhaps nowhere else has the retail sector experienced such a dramatic about face as in Hungary. Part of the May success came from non-food store sales, which rose by 4% – winning the month long enough to surpass March’s win. Sales at food and beverage stores continue to climb, up 0.5%. This strong growth is indicative of a real rebound in consumer spending and represents a positive sign for the country’s economy. The upcoming release of June’s inflation rate at 8:30 AM CET is expected to provide further insights into this trend.
Economic Indicators and Their Impact
Romania is under severe fiscal consolidation pressure which is crimping down private consumption. The central bank’s decision to announce interest rates will be crucial, as it may further influence consumer confidence and spending patterns. The CEE region is confronting varied fiscal policies. Romania’s experience points to a difficult trade-off between pursuing policies that stimulate economic development and pursuing government policies that promote fiscal consolidation.
Romania’s challenges are manifold. Czechia will be releasing its unemployment rate (15-65) at 9AM CET as well. This is an important figure in understanding the health of the labor market and what it may mean for consumer spending moving forward. Croatia will be announcing tourism arrivals this morning at 11 AM CET. This update will help to shine a spotlight on this vital economic sector that so profoundly affects our nation’s retail sales.
Poland’s Monetary Policy and Retail Dynamics
At the moment, monetary policy in Poland is the star of the show. Fellow central banker Iwona Duda is in favour of a deeper cut of 25 basis points later this year. The total rate cut in Poland is expected to amount to 100 basis points by 2025. While this shift is intended to boost economic activity, it will need to be accompanied by a close watch on inflation and exchange rate stability.
On Monday, CEE currencies traded weaker against the euro. This weakening could lead to a deterioration of retail conditions overall, especially as the default VAT rate is scheduled to increase this coming August. This July, retailers are already in the thick of actively prestocking robustly. This action will likely generate a short-term surge in retail sales as shoppers prepare for imminent price increases.
In Slovakia, retail sales have been under pressure, down 1.3% year-to-date. This trend demonstrates the vastly different economic conditions across the CEE region. For some countries, these are boom times, as others struggle under the weight of recession and memory.