PRAGUE, July 14 (Reuters) - Czech retail sales fell by a
much worse than expected 7.5 percent year-on-year in May, the
biggest drop since the start of the year, data showed on
Tuesday.
The fall followed a 2.0 percent drop in April. Analysts had
expected a decline of the same level in May, according to a
Reuters poll.
The data also diverged sharply from a trend of higher-than-
expected consumer spending earlier this year, which the central
bank cited as crucial to its decision to leave rates unchanged
at an all-time low of 1.5 percent at its June meeting.
Analysts said the data strengthened arguments for another
cut and said it pointed to another significant contraction in
the second quarter, following a fall of 3.4 percent in gross
domestic product in the first three months of the year.
The Czech crown <EURCZK=> weakened to 26.03 per euro, from
26.00 before the data.
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KEY POINTS:
(change in percent) May April May forecast
RETAIL SALES (y/y) -7.5 -2.0 -2.0
(Click on [] for full table of May retail sales)
- The headline, unadjusted figure includes car sales and
repairs, fuel sales and spending on a variety of consumer goods,
including foodstuffs.
- Seasonally-adjusted retail sales dipped by a real 2.1 percent
month-on-month, while falling 5.3 percent year-on-year in May.
- Car and maintenance sales fell by 14.6 percent year on year.
COMMENT:
JAROMIR SINDEL, ECONOMIST, CITIBANK
"The data shows... a more significant drop in non-food
sales, which likely indicates that the state of the economy is
impacting consumer demand in a more perceivable way."
"We expect an overall revision of household demand for the
whole of 2008 and the first quarter of 2009."
"This should support further rate easing in the third
quarter."
JAN VEJMELEK, HEAD OF ECONOMIC AND STRATEGY RESEARCH,
KOMERCNI BANKA
"The data came significantly below market expectations. It's
visible that domestic demand is weak, as households are wary of
spending due to the recession."
"There won't be an improvement in the coming months."
"Weak domestic demand confirms there are no inflation risks
... Certainly, this is an argument for the market to speculate
on whether (the central bank) will cut interest rates at their
next meeting."
"We still think that rates will stay unchanged, but the risk
scenario that rates will be lowered is increasing."
PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT BANK
"The slump was in all segments, not only the car segment,
where the drop could have been expected due to the number of
registrations, which we already knew."
"It is clear that consumers are reacting to the economic
crisis with a delay."
"This of course is an argument for further lowering rates,
but it is not a quite unambiguous signal... Central bankers will
have to consider many more circumstances whether to go further
down with rates."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"It is surprisingly strong negative information."
"It is visible that the recession, hitting foreign trade, is
starting to materialise in domestic demand, and a further
decline in GDP in second quarter is to be expected."
"Today's data suggest that further estimates of economic
growth will be pushed lower (towards a weaker growth) and it
also point towards lower interest rates."
BACKGROUND:
- June consumer inflation []
- May industrial output figures []
[]
- Report on last Czech c.bank rate decision.......[]
[] [] []
LINKS:
- For further details on May retail sales and past data,
Reuters 3000 Xtra users can click on the Czech Statistical
Bureau's website:
http://www.czso.cz/eng/csu.nsf/kalendar/2004-slu
- For LIVE Czech economic data releases, click on <ECONCZ>
- Instant Views on other Czech data []
- Overview of Czech macroeconomic indicators []
- Key data releases in central Europe []
- For Czech money markets data click on <CZKVIEW>
- Czech money guide <CZK/1>
- Czech benchmark state bond prices <0#CZBMK=>
- Czech forward money market rates <CZKFRA>
(Writing by Jana Mlcochova)
