Commerce is starting to grow – the brake on consumption is easing up

Despite the sleet at the end of the year, Christmas sales were a pleasant surprise for the first time since Russia’s war of aggression started. The successful Christmas sales gave a boost to growth in the retail sector at the end of the year, although the full-year sales volume* decreased by -0.6 per cent. The Finnish Commerce Federation predicts that the sales volume of the retail sector will increase by approximately one per cent this year and by approximately 1.5 per cent next year.

“Although growth in the retail sector has now begun, it is still uncertain and slow,” says Jaana Kurjenoja, Chief Economist of the Finnish Commerce Federation.

Consumers are still very cautious and try to prepare for future public sector consolidation measures, i.e. cuts and tax increases, which have been proven to be inevitable for some time now. In addition, Finland’s largest asset, housing, has lost its value, and the unemployment rate has become one of the highest among the EU countries. Therefore, the soil for the growth of household consumption is not very fertile.

“The significance of domestic demand for economic growth and employment has not been understood, and the general VAT rate, for example, has been increased sharply. However, lower interest rates, low inflation, salary increases and the reduction in income taxation implemented at the beginning of this year will improve the situation. The slight growth seen recently in the retail sector should now be encouraged by additional measures,” says Kari Luoto, Managing Director of the Finnish Commerce Federation.

Luoto sees increasing and expanding the tax credit for household expenses and temporarily removing the transfer tax as ways to quickly improve purchasing power, consumer confidence and employment. The latter would especially support the sale of apartments taking off.

Growth is not enough to reverse the decline in employment

Although growth in the retail sector has begun and the decline in sales in the wholesale trade stopped last year, employment in the commerce sector continues to decline. Last year, 10,000 jobs were lost in the entire commerce sector, including 8,000 jobs in the retail sector. Nevertheless, the commerce sector is by far the largest employer in the economy.

According to the Finnish Commerce Federation’s forecast, approximately 5,000 jobs will be lost in the retail sector this and next year, in addition to the 8,000 jobs that were lost last year. In 2027, there will be 12,000–13,000 fewer jobs in the retail sector than in 2024.

“The growth of domestic demand and the retail sector is too slow to reverse the downward trend in employment,” says Kurjenoja.

Sluggish domestic demand, intense cost and price competition and international competition accelerate the decline in employment in the commerce sector as companies adjust their operations and improve their productivity. The disappearing jobs are primarily non-managerial tasks and supporting operations that can be replaced by more efficient data use and automation, digitalisation and AI-based tools.

Finnish consumers are more price-driven and fearful than Swedish consumers

Approximately 52 per cent of Finland’s GDP consists of private services and 26 per cent of processing, mainly industry. The significance of services and private consumption for economic growth is now clearly greater than it was at the beginning of the 2000s.

“Households’ belief in the future and ability to buy products and services are now critical for economic growth and employment in Finland. This is still not understood in political decision-making,” says Kurjenoja.

“In Sweden, for example, the purchasing power of households will be supported by temporarily halving the VAT rate of food to six per cent, starting from April 2026,” says Kurjenoja.

Finns’ trust in the future is clearly weaker than Swedes’, which does not bode well for private services, economic growth and employment. Finns look for cheaper prices more often than Swedes, and this price-drivenness has only increased over the past five years. However, the good news for the specialty and household goods trade is that Finns’ purchasing intentions have improved in the past two years.

*Inflation-adjusted turnover.

For further information, please contact:

Jaana Kurjenoja, Chief Economist, Finnish Commerce Federation, tel. +358 (0)40 820 5378, jaana.kurjenoja(at)kauppa.fi

Kari Luoto, Managing Director, Finnish Commerce Federation, tel. +358 (0) 400 688 708, kari.luoto(at)kauppa.fi