Retail sales in the Czechia fell sharply in 2023 amid high inflation, the statistics office said, although signs of recovery among consumers at the end of the year boosted chances of an economic revival in 2024.
For the full year, adjusted retail sales dropped 4.1%, the biggest fall in records going back to 2001.
In December, though, retail activity increased 1.6% year-on-year, rising for a second straight month after an 18-month decline.
The data chime with already released preliminary gross domestic product data for the fourth quarter that showed the economy avoiding a recession as household spending added a boost. Overall, the economy contracted 0.4% in 2023.
Inflation
Despite one of Europe's tightest labour markets, Czech workers have been especially hit by inflation that soared by double-digit rates in the past two years.
In the third quarter, real wages fell for an eighth straight quarter. In 2022, the average annual real wage drop in the Czech Republic - at 7.7% - was the biggest among countries in the Organisation for Economic Co-operation and Development (OECD).
Dominik Rusinko, an analyst at bank CSOB, said the aggregate level of savings grew at 19% last year, above a long-term average of 12%. Renewed spending, though, will drive GDP this year, he said.
"Overall, it should be expected that the revival of consumer demand will be gradual and we are expecting a more significant growth impulse only in the second half of the year," he said.
Household Spending
Analysts and policymakers, though, are forecasting revived household spending now that inflation is slowing quickly and real wages should begin growing again.
The rise in consumer activity is expected to compensate for manufacturing, which remains in a downturn.
But last month, the finance ministry cut its 2024 GDP growth forecast to 1.2% from 1.9%, largely as the rebound in household consumption was expected to be more muted than previously forecast.
