Argentina: brutal consumer recession, supermarket sales had the most violent fall in 17 months on Christmas

Christmas sales of SME companies plummeted compared to December last year, supermarkets registered a drop in sales of 1.6% year-on-year and for self-service wholesalers the drop exceeded 7%.

Real economic activity deepened the recessive trend that had already begun to appear in September. More and more high-frequency indicators suggest that the country has entered a recession, at the same time that inflation reaches all-time highs.

The Argentine Confederation of Medium Enterprises (CAME) estimated that Christmas sales of SME companies plummeted 1.8% compared to the level registered in December last year. This figure is an early sign of recession in retail consumption.

The most pronounced falls were observed in the category of clothing (-14.4%), bookstore (-7.5%) and footwear (-5.1%). The INDEC points out that clothing and footwear had a strong increase of up to 122.4% year-on-year in November, well above the 92.4% average for the general price level

The protectionist and commercial autarky policies promoted by President Alberto Fernández caused a distortion of relative prices, which ended up making the price level of clothing systematically more expensive compared to the rest of the goods and services in the economy. The main victims were small consumers, who were forced to give up their purchasing power.

Likewise, INDEC confirmed that supermarket sales fell by 0.7% only in October and collapsed by 1.6% compared to the same month in 2021. The most violent year-on-year drop in the last 17 months was recorded, and the Seasonally adjusted series of the sales indicator accumulated a retraction of 1.82% since July.

The inflationary outbreak in July triggered a new offensive against the purchasing power of real wages, and retail consumption has been dramatically affected since then.

The commercial retraction in the wholesale segment was even worse. The INDEC Wholesale Self-Service Survey revealed that the general level of sales plummeted by 2.1% in October and up to 7.1% in the interannual comparison.

The recession in wholesale market sales was so strong that even the cycle trend of the indicator fell by 0.8% in October (a metric that should normally be stable), and the accumulated variation in sales compared to the first 10 months of 2021 it showed a fall of 0.6%.

The financial repression of foreign trade and the exchange market implies a great recessive cost on real activity, but Minister Sergio Massa‘s team opted for this strategy instead of allowing a higher rate of devaluation on the official exchange market.

General economic activity measured by INDEC through the EMAE index fell by 0.3% in October and 0.27% in September, while industrial activity did not register growth in September and plummeted by 1.1% in October. Private consultants warn that the economy has already entered a recession, and the “ceiling” on the level of activity would have been reached in August 2022.

With information from La Derecha Diario