ZAGREB (Croatia), October 31 (SeeNews) – Austria's Erste banking group expects Croatia's industrial production growth to remain volatile despite a steady growth of retail sales in the country.

"Headwinds related to main trading partners' outlook would continue to weigh on the external demand performance, thus limiting stronger recovery potential," Erste analysts said on Thursday in a comment on Croatia's most recent industrial production data.

At the same time, Erste expects that the improving labour market conditions and better consumer sentiment will back an increase in domestic retail sales, reiterating the private consumption's role as one of the main pillars of economic growth.

Croatia's industrial output increased by 2% year-on-year in September, after falling by 1.7% in August, the country's statistical office said on Wednesday. On a monthly comparison basis, industrial production increased by 2.5% in September, after dropping by 3% in August.

The country's retail sales increased by a real 3.5% on the year in terms of volume in September, after growing 1.2% in August, the statistical office said.