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Monday, October 8, 2007

Romania Retail Sales August 2007

Well following hot on the heels of the IMF delegation assessment that the Romanian economy may be overheating comes some additional information that they may be right. Romanian retail sales rose at the fastest annual pace since at least 2005 in August as higher wages and a surge in consumer credit prompted citizens to shop more.

Sales increased an annual 34 percent, up from a 23 percent gain in July, according to data from the National Statistics Institute (INSEE) released today. Month on month, sales growth quickened to nearly 16 percent, up from 9.2 percent in July.

Sales of food, drinks and tobacco surged an annual 60 percent, up from 38 percent in July, while service industry sales increased 22 percent, compared with a gain of 1 percent. Sales of non-food goods gained 10 percent, from 9.1 percent. Here is the chart of the general index.

and here are the month by month annual increases so far this year. Sales certainly do seem to be accelerating at the moment.

This latest data adds to a mounting volume of evidence that Romania is overheating as consumption has steadily risen on the back of as a rising inflow of investment and worker remittances which has been developing since Romania joined the European Union on Jan. 1 2007. Before the recent downturn in the leu the currency had been strengthening and wages have been accelerating rapidly. Average net wages rose at an annual 23 percent rate in August. In general terms the leu is still up 16 percent against the dollar and 5 percent against the euro over the past year, and this is undoubtedly encouraging Romanians to buy more imports.

Private indebtedness of individuals in Romania rose at an annual 50 percent rate in August, much of it in the form of consumer loans, as wage growth increased Romanians' borrowing power, according to a report from the central bank on Sept. 25.

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