BUSINESS

Consumption slumps further in the year's first months

DIMITRA MANIFAVA

TAGS: Economy

The year has started with some alarm bells regarding the course of consumer spending, generating concern not only about the impact on the supermarket sector and industry, but also on the economy in general.

In the first week of March the year-on-year drop in supermarket turnover amounted to 15 percent, while in January the decline had come to 10 percent. Shrinking consumption is a sure sign that the economic contraction will be extended into another year, given its important role in the economy.

The new indirect taxes on a number of commodities, the increased social security contributions, the persistently high unemployment and the ongoing uncertainty over the bailout review talks have hurt consumer confidence and eroded disposable incomes.

In this context, it will be exceptionally difficult to achieve the fiscal targets, especially if the uncertainty goes on or is ended with the imposition of additional austerity measures that would only see incomes shrink further.

According to projections by IRI market researchers, supermarket sales in 2017 are expected to decline 3.6 percent from last year, with the worst-case scenario pointing to a 4.4 percent drop.

Supermarket sales turnover dropped at the steepest rate seen in the crisis years in 2016, down 6.5 percent, after falling 2.1 percent in 2015, 1.4 percent in 2014, 3.5 percent in 2013 and 3.4 percent in 2012.

Given the increase in the value added-tax in many food categories from 13 to 23 percent in July 2015 and then to 24 percent last June, sales of packaged food dropped 7.4 percent year-on-year in July 2015 and another 2.5 percent in July 2016, while sales of food sold in bulk rose 3.6 percent and 0.3 percent respectively. Now, even sales of food sold in bulk are expected to contract this year, by 2 percent, and sales at cash & carry outlets are expected to post a 0.6 percent decline, according to the IRI projections for the whole of 2017.

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