Retailers report spending surge before Christmas and in sales but mean times seen in 2011

Czechs opened their wallets wide before Christmas and are apparently continuing to spend, spend, spend in the post-Christmas sales. But some are warning that the spending spree will soon end with a gloomier start to 2011 on the horizon.

Photo: CTK

Major retailers in the Czech Republic reported brisk business before Christmas and signs are strong that this is continuing.

Tesco, one of the country’s biggest retailers of food and household goods, said spending was up 6.0 percent in the pre-Christmas period compared with 2009. It stacked shelves with more expensive branded goods to meet the unexpected demanded. Rival Ahold says turnover at its Czech outlets climbed by 10.0 percent.

Shoppers appear to have been pulled back into stores a second time round to lighten their wallets by the post-Christmas sales. Price cuts of up to 70 percent are being offered on clothes, games, furniture and decorations in the first wave of reductions. Some retailers, especially those of electrical and electronic goods, hold back their sales until the start of January.

Photo: CTK

A survey by one local bank suggests that Czechs are prepared to spend up to 17 percent more on clothes, shoes and electronic goods during the post-Christmas sales.

But some economists are warning that the sales splurge could really be just a blip on the overall economic picture of still fragile consumer confidence coming out of the economic recession. One of those warning against reading too much into the recent spending surge is Unicredit chief economist Pavel Sobíšek.

Photo: CTK

“I doubt that the reporting of higher retail sales in the last weeks of December will be a signal of long term change in consumer confidence. First of all, the basis for December retail sales has been depressed by poor sales from 2008 and 2009 when the economic crisis was underway. Secondly, the government austerity measures, albeit moderate, will affect consumer purchasing beginning from January 2011 onwards.”

Mr. Sobíšek sees government measures such as cuts in public pay and staff levels together with continued worries about employment putting a dampener on spending at least in the first half of the year. Economists are predicting lower economic growth next year than this. The picture of what will happen after that that is not so clear.

Pavel Sobíšek

“I guess that we will see in the first half of 2011 private consumption stagnating rather than growing. The question is what will happen afterwards. It is possible that in the second half of 2011 private consumption will start growing again but only on condition that general economic conditions start improving.”

So it looks as if Czech retailers should make hay while the sun shines because problems could well be in store for 2011.