ECONOMY

Buoyant retail sales show Greeks are still shopping

Greek consumers might have been feeling jittery in the runup to the start of the war in Iraq, but this did not stop them from spending at a frenetic pace at the beginning of the year. Retail sales in January rose 10.5 percent from the same month a year ago, preliminary data released by the National Statistics Service yesterday showed, with the biggest increases recorded in food, books and stationery. The January retail sales figure was a marked improvement from the 6 percent posted in the previous month and was also better than the average rise of 8.9 percent for 2002. The continuing buoyant sales growth showed that Greek consumers had not been discouraged by the impending war in Iraq to stop spending, said Dimitrios Maroulis, economist at Alpha Bank. Fears that consumer spending could be hit by the rising tension came after a survey by the economic think tank Foundation for Economic and Industrial Research in January found the retail sector was feeling less confident for the second month in a row, with the majority worried by low sales growth and high levels of inventories. «The negative sentiments did not feed into the real economy as evidenced in robust consumer spending. It’s a good portent for the year,» said Maroulis. Inflation and the tourism industry apart, economists said the war in Iraq is not expected to impact on domestic demand and economic growth this year. A lengthy conflict, however, could sap consumer confidence and stunt growth. Maroulis said the jump in retail sales had been expected following a 15.3 percent hike in VAT revenues in the first two months of the year. Consumers have also been encouraged to spend by the easy availability of cheap loans as banks stepped up the battle for a greater share of the retail market to offset lower returns from trading activities. «Greeks are still borrowing heavily from banks,» said Maroulis, underscoring a catch-up process with the rest of the eurozone that is expected to continue in the years to come. The continued strong growth in consumer spending will be welcome news to the government, which is looking to the private sector to help drive the economy forward this year along with a massive investment outlay related to the 2004 Olympic Games. It is forecasting a rise in private consumption of over 3 percent this year comparable to a 3.2 percent increase in 2002. Greeks’ willingness to spend is being fueled by higher real disposable incomes, rising employment and strong consumer credit growth, EFG Eurobank Ergasias said in a research note last week. It said that lower personal income taxes that came into effect this year are set to jack up real household disposable incomes by 3 percent, giving consumers more cash to spend.