31.07.2023

Subdued Development in Retail Trade in the Second Quarter of 2023

Retail Business Cycle Report in Cooperation with the Austrian Retail Association

"The subdued course of business at the beginning of the year in the retail sector has continued in the recent months and in some cases cooled even further. This is dampening the sentiment of retailers. Consumers also remain cautious despite a slight easing in inflation", says WIFO economist Jürgen Bierbaumer.

After the domestic economy has already lost significant momentum since the second half of 2022, current estimates show a further slowdown. Economic activity based on the Weekly WIFO Economic Index (WWWI) stagnated in June 2023 compared to the previous year and declined by ¾ percent in the first half of July.

In the retail sector, business activity was noticeably subdued in calendar-adjusted terms in April (nominal +2.4 percent, real –5.7 percent) and May 2023 (nominal +3.0 percent, real –3.9 percent). Especially in the non-food sector, sales development was very weak.

After inflation was still around 11 percent at the beginning of the year, inflation fell to 8.9 percent in May and continued to decline to 8.0 percent in June. However, the price increase is still at a high level and, at around 2½ percentage points, clearly above the average for the euro area.

Sentiment in the retail sector deteriorated recently. In the last two surveys, the balance of positive and negative assessments was again more clearly in the pessimistic range (June –10.8 points).

The domestic sentiment among consumers, on the other hand, recently rose slightly again. Compared to German households, however, it is more pessimistic. The assessments of Austrian households regarding the change in the financial situation of the household in the last 12 months as well as the level of spending on major purchases in the next 12 months showed little change.

In 2023, only minor growth impulses will come from private consumption (+0.9 percent). In particular, households with limited liquidity are likely to reduce their demand due to the high price increases. For 2024, higher consumer demand from private households is expected (+1.8 precent).

The stock of unfilled vacancies in the retail sector remains high, but 11 percent below the level of the previous year. Currently, 14,717 vacancies (total economy 118,566) cannot be filled promptly.