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The rebound of the dollar and the fear of borrowing leave consumers gasping for air

2020-10-31T12:35:37.990Z

Retail sales are down 6.8% so far this year. Analysts see little chance of them picking up for December.



Annabella quiroga

10/31/2020 6:00 AM

  • Clarín.com

  • Economy

Updated 10/31/2020 6:00 AM

Argentine workers have been watching their salaries lose month after month against inflation for 30 months.

INDEC data show that from January to August of this year

the collapse reached 6%

.

And there are no expectations that the situation will improve in the rest of 2020. Thus, December, the month that is traditionally the highest in sales, is shaping up to offer off parties, with social distancing and masks.

The quarantine set the pace of consumption in 2020. Everything came to a halt with the onset of the pandemic, except for supermarkets, which at the start of the pandemic

rose 15% year-

on-

year

according to data from Kantar Wordpanel, driven by the need to stocking amid uncertainty.

The consulting firm Ecolatina reports that at the beginning of the pandemic, durable goods sales collapsed.

The patents of cars and motorcycles collapsed 70% and in the two-month period March-April.

In the same vein, home appliance sales fell 35%.

But with the running of the quarantine, the situation changed.

According to the Nielsen Express index, consumption in supermarkets fell 3.3% in August and 2.5% in September.

At the same time, "the scarcity of savings options in a scenario of excess liquidity, devaluation fears and the possibilities of buying official dollars through access to imported goods

boosted the consumption of durable products

," Ecolatina points out.

"The improvement is explained more by factors associated with repressed consumption and late purchases of the first part of the year than a genuine and sustainable improvement."

Maximiliano Doff is Analytics Leader at Nielsen Argentina.

"Consumption in the accumulated until September

fell 6.8% in all the retail sales channels of

the country, including bars and restaurants. Due to seasonal factors it is possible that December will be better than the previous months, but against the consumption base there is no sees a very strong change in the dynamics.

Nothing indicates that consumption is going to reverse what is happening so far

".


"With uncertainty and without access to the dollar, we seek to save through consumption. The crisis expertise of this society appears, that

if there is something that knows how to do very well, it is to save by consuming,

" says Guillermo Oliveto, president of the consulting firm W .

This enjoyment of saving by buying supports the sale of durable goods, such as motorcycles, a segment rebounded 50% in September.

But it also benefits the aftermarket market.

"The blue cost of construction is the lowest since 2008. Sales of paints, hollow bricks, cement, ceramic floors are growing.

People invest in improving their house and transform pesos into well-being,

" says Oliveto.

Even so, Oliveto remarks that "having a consumption boom at the end of the year would be quite illogical. We are going to a 12% drop in GDP, the worst in history. It is illogical to think that it will not affect consumption."


"In the quarantine there was

an illusion of purchasing power

 because 40% of the average household expenses were off the agenda. There was no spending on recreation, culture, travel, gastronomy or transportation. And little was spent on clothing and personal care When the economy begins to open, that illusion is broken: people realize that their purchasing power is 75 or 80 and not 100 as they thought, "says Oliveto.

The decline in purchasing power is not the only brake on consumption.

"Today people are prioritizing cleaning up personal finances and canceling debts. A survey we did shows that

65% believe that the worst is yet to come,

" says Victoria Giarrizzo, director of the CERX consultancy.

"But there is an effect that compensates: people who, in fear of devaluation, anticipate purchases. Consumption will go

hand in hand with what is going to happen with the dollar. 

If there is instability, it will retract."

"A December that explodes in consumption is not expected, a very calm December is expected," says Giarrizzo.

Another decisive element is that "people are avoiding card consumption and buying more with debit. They do not want to go into debt again and prefer to pay off debts."

Despite this diagnosis, the Government's commitment continues to be that consumption will be the axis of reactivation next year.

"Consumption as an engine falls short for three reasons:

falling income, negative expectations and a change in habit

. With the experience of quarantine many people realized that they can live with less consumption and do not feel that for that reason they lose well-being, "says Giarrizzo.

"Pumping a consumer economy with high financing costs in the medium term is a trap. There are still several installments to pay for refinancing that were made with a credit card. If families' income does not improve, it is very difficult for consumption to improve ", warns Giarrizzo.

Consulting firm LCG does not expect there to be a considerable improvement in real wages.

"The increase in unemployment in the second quarter and the restrictions that still exist to operate, combined with inflationary records that are expected to be above 3% per month in the remaining months, will continue to support

an adjustment in the labor market via prices

".

For Ecolatina, consumption would not be mobilized in the last part of the year.

"The situation of the exchange market lights up warning signs: if the official dollar were to shoot up, there would be an inflationary jump that would aggravate the fall in family income, negatively impacting consumption in the short term. In this scenario, perception of cheap dollar that encouraged the purchase of durable goods in recent months would end, placing the item in negative territory again. In the same vein,

mass consumption would suffer a drop in purchasing power

. "

"We project a GDP drop of not less than 12% on average for 2020, which would cause activity to return to levels similar to those of 2009 and GDP per capita to be the lowest since 2004," they said.


AQ

Look also

The five shocks that made the blue dollar fall more than 25 pesos in a week

Blue dollar: fell to $ 169 and fell 26 pesos in a week

Source: clarin

All business articles on 2020-10-31

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