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The two speeds of consumption: less food and clothes are sold but more motorcycles and household appliances

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Consumption so far shows two faces in 2023: the sale of foodstuffs and other basic necessities decreases and the purchase of cars and household appliances increases. All within the framework of an economy that slows down from month to month and which is preparing to close the year with a gross product down by 4% and inflation around 140%.

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A survey by Fundación Capital points out that “economic activity will contract by 2.7% year-on-year in 2023, in our moderate scenario. Private consumption will be contained, with an annual decline of 1.4% by a new 3.3% drop in household purchasing power”.

There it is reflected that consumption moves at two speeds: the sale of food presents annual drops, while that of durable and recreational goods maintains positive year-on-year records, without recovering the level of 2017.

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The surveys of the Scentia consultancy register have dropped in mass consumption since September of last year. The food product deepened its decline to 2.8% year over year in March, in a month with food prices rising well above the CPI (9.3% vs 7.7% m/m).

The trend in consumption is uneven according to the purchasing channels. Warehouses and supermarkets report a drop of 6.9%, while supermarket chains grew by 6.1%.

Industry sources describe this in detail The mass consumption pie is shrinking month by month, even if it’s not the same for everyone. Thanks to the Fair Prices program, the supermarket channel gains share over shops, supermarkets and wholesalers, the reason being that there is about a 30% price difference between the two channels. “Prices are lower in large supermarkets, even if there are products that are in short supply,” they say,

The situation is different in the case of durable goods.. The sale of household appliances grew by 18.8% in the first two months in real termsalthough it is still 15.7% lower than the same period in 2017.

“Consumption in the catering areas and in the kiosks inside the shopping centers show good dynamism, even exceeding the level of 2017 in the first two months of the year (5.4% in the first two months). Instead, they are obvious declines from October in purchases of clothing, footwear and leather goods (2.5% year-on-year in February), in the context of sharp price increases of these products 119%”, underlines the Capital Foundation.

motorcycle patent it increased by 12.3% in the first quarter, driven by more accessible funding lines. Cars, on the other hand, have stagnated since the end of 2019, and at a very low level (-48.2% vs. 2017).

Gabriel Paredes, Head of Omnichannel at Familia Bercomat, points out that building supplies are in great demand. “The most sought-after product categories are ceramics, porcelain stoneware, holes, sanitary ware, faucets and false ceiling panels with the relative accessories. As of today this year the average ticket is about $50,000 with nearly 100% growth vs. last year. We continue to offer fixed installments and special interest-free installment promotions to make paying easier and more affordable for our customers.”

“In the registers at the beginning of the year, a certain dynamism is maintained in the consumption of durable goods and services, which can be connected to higher income sectors that continue to capitalize on the uncertain environment and few savings alternatives due to the exchange rate, and with incentive programs such as Pre-Travel or fixed installments with Ahora 12″, indicates the Capital Foundation.

While those with more resources embark on preventive consumption in the face of rising prices and fear of devaluation before or after the elections, those with fewer resources cannot find a way to defend themselves.

A UADE report states that in the period from January 2017 to March 2023, in real terms, “salary lost 15% of purchasing power against inflation, showing in 2021, 2022 and in the first months of 2023, an acceleration of the inflationary pace, which widens the gap between price increases and wage increases”.

The “Barrani effect”

Eduardo Crespo, FLACSO economist, supports through a Twitter thread the theory that consumption and the economy are not as depressed as the statistics show. And he explains the “barrani effect”, Twitter’s euphemism for bill-free consumption,

Crespo points out that the underground economy is greater than is usually estimated and that it is not only linked to low-income sectors. “The actions, combined with the accelerated effects of the pandemic on communications (zoom, Google meet, etc.), helped create an informal sector for middle and high incomes”.

“Thousands of residents export attractive services barren forms of payment. A vast universe of software companies, freelance programmers, psychoanalysts, etc., invoices via Paypal, deposits in Uruguay, cryptocurrencies and a long etcetera”, explains Crespo.

AQ

Source: Clarin

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