Retail Sales rise across CEE in May, except for Slovakia

On the radar

• June’s inflation rate in Hungary is scheduled for release at 8.30 AM CET

• At 9 AM CET Czechia releases share of unemployed 15-65, while Croatia tourism arrivals at 11 AM CET.

• Today, Romania will announce interest rate decision.

Economic developments

The series of yesterday’s releases of retail sales growth in several CEE countries completes the information about development of retail sector in May. Retail sales grew in all CEE countries but Slovakia, where it declined by - 1.8% y/y in May. In most of the CEE countries retail sales growth slowed down compared to April 2025 to a greater or lesser extent. In Hungary, for example, retail sales growth was supported by the sales of non-food stores in May as sales in food stores increased by only 0.5%, while non-food retail sales grew by 4%. However, retail sector performance in Hungary is so far better compared to 2024. Further in Romania, private consumption is pressured by fiscal consolidation. The increase in standard VAT rate as of August could lead to prestocking for some items and a temporary jump in retail sales in July. The higher VAT tax is most likely the reason why Slovakia is such an outlier in the region (decline of retail sales by 1.3% year-to-date). In general, we observe slower growth of real wages that translates into lower growth dynamics of retail sales across the region (most notably in Croatia, Romania and Serbia). This is also in line with our view that private consumption growth will sustain positive growth dynamics in 2025 albeit the pace of growth is expected to be slower.

Market developments

CEE currencies have weakened against the euro on Monday. While European Union tries to lock the tariffs at 10%, President Trump threatens other countries like Japan and South Korea with higher tariffs. Locally, Romania’s central bank will announce interest rate decision. It is widely seen keeping interest rates unchanged at the 8 July meeting. Inflation outlook has deteriorated, and, on a net basis, the announced fiscal consolidation package is inflationary over the short-term. Uncertainties related to the impact of the increase in energy prices after the regulatory cap expired 1 July and announced measures to increase VAT rates and excise duties should postpone plans to reduce interest rates into 2026. In Poland, the central banker Iwona Duda said she would support another 25 basis points cut this year that would materialize the scenario of overall 100 basis points rate reduction in 2025.

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