Czech retail sales came out below consensus in December. The sales were boosted by 2 more working days in December 2008 (compared to 2007). WDA figure would show more than 5 % decline.
Increasing unemployment and more evidence about recession weigh on consumer expenses. We can see a negative impact on goods sensitive to business cycle, such as cars, household equipment or electronics.
Retail sales grew by 0,5 % in 2008 vs +7,5 % in 2007. The year 2009 will be even worse: We expect the sales to fall by 2,6 % due to higher unemployment and weak wage growth.
December RS figures provide more evidence about starting Czech recession. Development of the real economy opens room for more CNB rate cuts, however, the sharply weakening currency is an argument against aggressive steps. Thus, the next rate cut will likely by smaller (25 pbs).