Romania’s private consumption drops on VAT rate hike effects in August

Romania’s retail sales volume index contracted by 4.1% in August after a 5.4% y/y advance in July (revised from +5.3% y/y), the statistics office INS announced on October 6. The sudden slowdown in August was expected and it probably overstates the fundamental deceleration in the private consumption as an effect of higher VAT rate and higher excise duties enforced as of August 1 but particularly reflecting gloomier consumer sentiment induced by the ongoing fiscal consolidation policies.

For July-August, the retail sales maintained a slight positive growth rate (+0.6% y/y), supported by 4.6% y/y higher car fuel sales and +1.1% y/y sales of non-food goods, while the food sales dropped by -2.2% y/y.