LUCIAN ANGHEL: THE DECREASE IN SALES LEADS TO A CONTRACTION OF THE GDP In 2012 we will rely heavily on the absorption of European funds

• The GDP should find other engines for growth, such as industry or exports, Lucian Anghel considers

Next year, everything will depend heavily on our rate of absorption of European funds, said Lucian Anghel, the chief-economist of the Romanian Commercial Bank (BCR), as turnover in retail fell 4% after the first ten months of the year (gross series), compared to the similar period of 2010, and 4.5% respectively (adjusted series).

These drops led to a significant contraction of the GDP, said Mr. Anghel, who thinks that Romania "should find other sources for growth, such as industry or exports". He considers that this evolution of the turnover, which is noticeable when it comes to the GDP as well, was to be expected, as the drop in consumption was also a result of the raise of the VAT last year and of the implementation of the austerity measures by the government: "I don't expect this situation will improve in 2012 compared to 2011. The international context will cause us to follow the same negative trend that we do now".

Between January and October 2011, the drop in retail sales (with the exception of cars and motorbikes - gross series - was caused mostly by the drop in the sales of pharmaceutical, medical, cosmetic and perfumery products, as well as by the drop in sales of foodstuffs, drinks and tobacco in specialized stores, according to the National Statistics Institute.

Over the same period, turnover for retail (with the exception of cars and motorbikes) - adjusted series -, based on the number of working days and seasonality, decreased, mostly due to the drop in the prices of foods, drinks and retail sales of car fuel in specialized stores.

In October 2011, compared to the previous month, this ratio fell 2.7% (gross series) and 2% respectively (adjusted series).

• The hourly labor cost - on the rise

In the third quarter of 2011, the hourly labor cost in adjusted form (based on the number of working days) grew 3.55% over the previous quarter and 10% over the same quarter of the previous year.

In gross (unadjusted) form, over the same period, the fluctuation of the hourly labor cost differed slightly from the adjusted form (3.48%, and 10.02%, respectively). Over the same time period, compared to Q2 2011, the hourly labor cost in adjusted form increased more in education (16.65%), mining industry (10.55%) and the production and providing of thermal and electrical energy, gas, warm water and air conditioning (6.48%).

The largest drops were seen in other types of services (-1.51%), financial intermediation and insurance, and information and communication (-1.01%). The accented increase of the hourly labor cost in education was caused by the reduction in the effective work time compared to the previous quarter (-20.5%), a phenomenon specific to this operation in Q3 2011, caused by the bank holiday.

In the mining industry, the rise of the hourly labor cost was caused by the reduction of the actual work time compared to the previous quarter (-5.2%), due to the holidays, as well as by the increase of direct expenses, due to the granting of occasional bonuses.

Direct (wage) workforce expenses, in adjusted forms, increased 3.54%, whereas indirect (non-salary) expenses increased 3.60%. The growth recorded by the two components - for indexes in gross (unadjusted) form were 3.46% and 3.53%, respectively.

In the third quarter of the current year, compared to the third quarter of 2010, the highest increases of the hourly labor cost (in adjusted form based on the number of working days) were seen in healthcare and social assistance (19.73%), public administration (18.58%) and education (17.20%), due to the different wage structure applied in these two years for employees paid out of public funds.

The lowest increases were seen in information and communication (4.41%), and in administrative and support services respectively (4.82%). The increase over the same quarter of 2010 - indexes in adjusted form over the number of working days - for the direct labor expenses component (wages) was 10.01%, whereas for gross (unadjusted) indexes it amounted to 10.03%. The indirect (non-salary) expenses component saw increases of 9.96%, and 9.98%, respectively.