The Lithuanian Economy - August 5, 2011
Better expectations and lower savings behind consumption growth
- Retail trade in the first half of this year increased by 22.1% over the same period a year ago. Although trade in motor vehicles was the main factor behind this growth, trade in other non-necessities was also increasing more rapidly. As inflation slows and expectations gradually rise, the growth of household consumption will continue.
- Domestic credit is growing slowly and will contribute some, but is not likely to be a major driving force behind higher consumption. Although deposits have continued to increase, it is likely that households have also continued to reduce their savings rate, which peaked at 7.9% in 2009.
- The labour market remains weak – in the first quarter of 2011, the unemployment rate was 17.2%, only slightly lower than in the same period one year ago. Annual net monthly earnings in the same period increased by 1.9%, but were still below the inflation rate. More recent data from the Lithuanian Labour Exchange suggest that stronger positive developments in the labour market will become visible in the second half of this year and in 2012.