The retail sales volume index in Romania increased by 3.5% y/y in Q1, less than half of the outstanding growth rates in 2024 (+8.6% y/y), according to the statistics office INS. Slower disinflation and comparatively modest wage hikes contributed. 

The food sales dropped by 2.0% y/y in Q1 (+3.8% y/y in 2024), but the non-food retail sales surged by 7.8% y/y in the same period – which was still half the 14.8% y/y advance in 2024. This indicates robust consumer confidence overall but more cautious spending among medium or lower-income households subject to wage restrictions in the first quarter of the year.

The slowdown of the overall retail sales in Q1 2025 was partly due to the more prudential wage hikes extended by the private companies and to the Government freezing the wages in the public sector. 

Overall, the average wage increased by around 5% y/y (in January-February) in real terms, a significant advance but slower compared to +7.4% y/y in 2024. 

However, wage dynamics are only one of the drivers of retail sales in general. In fact, retail sales jumped by nearly 30% over the past five years (+5.4% per year on average), while the real net wage rose by only 17% (+3.2% per year on average). 

Net consumer lending and the service of households’ overall debt are two elements that have a direct impact on households’ budgets. Both of them are likely to reverse the positive impact that has been visible in the past couple of years when consumer lending gained momentum and the decreasing interest rate eased the pressure of mortgage loans on households’ budgets.

Rising inflation, higher interest rates (hence higher installments on mortgage loans as well as costlier consumer loans), and depressed consumer confidence are likely to further moderate retail sales in the coming quarters.

iulian@romania-insider.com

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