Analysts Expect Retail Sales to Stagnate in Coming Months

Bratislava, 6 July (TASR) – The stronger-than-expected growth in retail sales in Slovakia in May is unlikely to be sustained throughout the summer, with household consumption expected to return to contraction, as weak consumer confidence and ongoing fiscal consolidation continue to weigh on spending, analysts stated on Monday. Retail sales rose by 0.9 percent year-on-year and by 0.1 percent month-on-month in May, according to data released by the Statistics Office. "Despite the improvement in May, we expect retail sales to remain under pressure in 2026 and to broadly stagnate in real terms, as also indicated by the modest cumulative retail growth of 0.2 percent since the beginning of the year," said Maximilian Weber, an analyst at Slovenska sporitelna. According to Weber, persistent uncertainty is likely to encourage households to save rather than make major purchases. He noted that inflation and higher fuel prices have already eroded part of household savings, while higher European Central Bank interest rates are expected to further limit access to credit by increasing borrowing costs. UniCredit Bank Czech Republic and Slovakia analyst Lubomir Korsnak pointed out that households may have unexpectedly resumed spending on smaller non-food purchases, but they were still postponing larger expenditures. He pointed to sales and servicing of motor vehicles, which fell by 2.7 percent month-on-month in May after seasonal adjustments. On an annual basis, the decline in this category deepened from 8.2 percent to 12.5 percent, creating the sharpest year-on-year fall since the final months of 2020 during the COVID-19 pandemic. Korsnak noted that although consumer confidence continued to recover in June from a low in April, it remained close to a three-year trough. "Low consumer confidence raises questions about the sustainability of the spring recovery in retail sales," said Korsnak. With fiscal consolidation also reducing households' disposable income and expectations of a renewed deterioration in the labour market, Korsnak thinks that the unexpected spring improvement in retail sales is unlikely to last and that turnover could return to negative year-on-year growth during the summer months. mf/df