ECONOMY

Liquidity in the market is drying up

liquidity-in-the-market-is-drying-up

The number of consumers seeking arrangements for various debts has soared during the pandemic, according to a survey by Wemetrix. Debtors are seeking to settle arrears for the payment of services such as utility bills, as well as to secure favorable payment plans for the acquisition mostly of homeware and domestic appliances.

The research covered specialized online stores from March 2020 to January 2021, and found that requests to pay for washing machines and refrigerators in installments averaged five per day before the pandemic, while during the summer that figure jumped to 25 a day. That only concerns tranche programs by major retailers, and not programs that banks offer via credit cards.

Given that banks approve about one in every five credit requests, Wemetrix estimates that the durable goods trade, among others, will face serious liquidity difficulties in the coming months, when payments start stalling and demand drops for laptops and audiovisual systems.

Wemetrix, which specializes in customer risk and value analytics, has therefore documented the deterioration of liquidity conditions during the lockdown periods, despite the state support measures – that cover only a small part of corporate and household incomes lost.

According to the same data, the findings regarding arrangements for basic services such as water and telecommunications are even more concerning, as applications have increased significantly; these concern an average of more than 70 days of delayed payments, and account for 45% of transaction volume.

Payment delays, according to the Wemetrix findings, concern the entire supply chain and are reflected in the extension of payment time in the sectors of food and energy by about 10 days. This was always an overstretched period in the economy, as suppliers typically have to wait a long time to get paid, but this has grown further during the pandemic as corporate turnover shrinks and real incomes diminish.

Although the deterioration of cash flows is not reflected in the data of the deposits that households and corporations have at banks, every analysis has shown this is temporary and does not constitute a genuine and permanent improvement of liquidity in the economy.