Retail sales in Ukraine slide to their lowest level in four years

Photo: Ukrainian photo

Retail sales in Ukraine increased 2.9% in January-May compared to the same period last year. In monetary terms, retail turnover totaled UAH 343.3 bn over five months, according to the State Statistics Service. This is the lowest growth indicator since July 2010.

According to the SSS, the largest turnover of retail sales in the first five months of the year was observed in Kyiv (UAH 46.7 bn) and the Donetsk oblast (UAH 34.9 bn). The lowest result was registered in the Chernivtsi oblast (UAH 5.08 bn). The highest growth rates of the turnover were observed in the Kyiv oblast (up 9.1%), the Rivne oblast (8.4%) and the Zhytomyr oblast (8.3%). Compared with the previous month, the growth rates in May nearly halved with April growth at 5.6%. The SSS explains that the data does not include information on the temporarily occupied territory of the Autonomous Republic of Crimea and the city of Sevastopol.

Decline factors

The depressed consumer moods of Ukrainians correspond to the statistics. The desire of Ukrainian citizens to spend money subsided in April due to the escalation of the conflict in the eastern part of the country, according to the results of the latest survey by GfK Ukraine. The Index of Current Personal Financial Standing decreased the most. The Index of Anticipated Economic Conditions in the Country over the Next Year also sunk. “The military confrontation in Donbas had an obvious impact on consumer confidence. However, the majority of people believe this is a short-term crisis and remain more optimistic about the country’s economic development in the mid-term”, say analysts at GfK Ukraine.

Hryvnia devaluation and accordingly price escalation of imported consumer goods forced Ukrainians to economize. Experts believe that early in the year Ukrainians purchased more goods fearing that prices would grow. As Director of the Analytical Department of Concorde Capital Oleksandr Parashchiy told Capital earlier, expectations of the further weakening of the national currency and instability of the banking system urged people to spend money on imported goods. Moreover, inflation accelerated. In May it increased 3.8% reaching 10.9% in the first five months. Consumer price growth last month was primarily due to a 62.8% hike in tariffs for natural gas for households, which led to a rise in the cost of housing utility services.

Sad dynamics

The slowdown in retail turnover began to take shape in the second half of the past year. In 2013, retail turnover increased 9.5%, compared to 15% in 2012. The dynamics of retail turnover may continue to slow down, say experts. “The growth rate of retail turnover in terms of year-on-year indicators will continue to decrease, possibly, to zero,” says Oleksandr Valchyshev, a senior analyst at the Investment Capital Ukraine group (ICU). Geopolitical and macroeconomic shocks are the key reasons for such a development, he believes.

The former is determined by the conflict with Russia. Its effect will be long-lasting, at least until 2015, believes the expert. The latter will be conditioned by macroeconomic adjustment, which, among other changes, will push domestic consumption to the purchasing of domestically produced goods.