Wednesday, July 8, 2009

Romania Retail Sales Plunge, Led by Cars, Services

By Adam Brown

July 8 (Bloomberg) -- Romanian retail sales declined the most on record in May as lending and wage growth slowed, prompting consumers to put off buying new cars and avoid restaurants, movie theaters and other services.Retail sales slumped an annual 12.3 percent, falling for a fifth month after a drop of 9.7 percent in April, the Bucharest- based National Statistics Institute said in an e-mail today.

That is the biggest decline since at least Jan. 2006, the earliest data available. On the month, sales rose 0.2 percent.The economic recession, which has hit retail sales throughout Europe, has prompted Romanians to delay or cancel shopping trips for non-essential goods after a spending spree that drove up retail sales as much as 34 percent in 2007. Gross domestic product shrank an annual 6.2 percent in the first quarter and the drop in consumption may postpone a recovery.

“We are concerned about economic prospects for 2010,” Nicolaie Alexandru, chief economist at ING Bank Romania, said in an e-mail today. “The ability of households to consume is key in this regard and the data so far is not looking good at all.”Sales of cars dropped 44 percent on the year in May while sales from services including restaurants, hotels and travel agencies dropped 13.9 percent, the institute said. Sales of consumer goods such as clothing and home appliances fell 11.9 percent and food sales slid 4.1 percent.

Lending growth, which accounted for much of the spending increases in the past three years, slowed to an annual 15.9 percent in May from as fast as 64 percent a year ago. Wage increases slowed to 8.7 percent from more than 20 percent.

The leu has weakened about 16 percent against the euro in the past year, discouraging Romanians from buying imports, which have fallen about 20 percent this year from last year.The statistics institute started this year reporting retail sales comparisons adjusted for the difference in the number of working days between months. Figures before January weren’t adjusted.

To contact the reporter on this story: Adam Brown in Bucharest atabrown23@bloomberg.net

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