Croatia Watch: Strong growth of industrial production and retail trade in Q1

The March industrial production and retail trade turnover data rounded off the Q1 statistics for the high-frequency indicators. In line with our expectations, strong positive annual growth rates were recorded for both indicators, thus confirming that the recovery has continued.

Industrial Production and Retail Trade (% p.a.)
CBS, RBI/Raiffeisen Research

Most trade branches recorded an increase in turnover

In March, despite a monthly decline of 2.4% (in real and nominal terms), retail trade was 14.3% higher in real terms compared to March 2020 (+15.5% nominal). Out of that, the retail trade turnover of food, beverages and tobacco decreased by 5.0%, while retail trade turnover of non-food products (except of automotive fuels and lubricants) increased by 33.6%.

According to the gross, unadjusted indices, an annual increase in turnover was recorded in nine trade branches, which generated 55.3% of total turnover, while two trade branches recorded a decrease. The largest increase in nominal turnover was realised by the following trade branches: Textile, clothing, footwear and leather goods (of 105.5%) and Audio and video equipment, hardware, paints and glass, electrical household appliances, furniture and other household articles (of 58.5%). On the other hand, the largest impact on the annual decline came from the decline in pharmaceutical, medical and orthopaedic products, cosmetics and toiletries, with a turnover decline of -7.6% and an impact on the overall turnover index of -0.7%.

In the first three months, working-day adjusted retail trade turnover in real terms increased by 6.0% compared to the same period 2020.

Industrial production growth driven by energy production

With a monthly growth of 3.4%, calendar-adjusted industrial production increased by 9.9%. Growth continued for the fourth month in a row, and the annual growth rate is the highest since December 2016. According to the Main Industrial Groupings, monthly growth was recorded in all categories, while Energy stands out with an exceptional high growth (+11.6% mom). On the other hand, besides Energy, which increased by 4.4%, all other categories recorded extremely high double-digit annual growth rates (durable consumer goods 18.8%, capital goods 15.7%, durable consumer goods 10.7% and intermediate products 10.4%).

Finally, the growth in recent months resulted in a strong increase in the volume of Q1 industrial production, compared to Q1 2020. It amounted to 5.7% according to the calendar-adjusted index, and 4.2% according to the original index.

The latest data from high-frequency indicators encourage expectations of a strong economic recovery despite the high level of uncertainty. In addition, business expectations in industry during March remained at the February level, but an improvement was denoted in trade. Consumer optimism continues to grow, suggesting positive trends at the beginning of Q2. However, it should be noted that all indicators are still below the pre-pandemic period and that strong growth rates are a consequence of the base period effect.