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Retail sales continue to decline – 2024-04-02 09:31:02

Retail sales in Colombia continued their downward trend in January, marking the eleventh consecutive month of contraction, as reported by Dane. In Neiva, merchants assure that despite having a large supply, demand continues to slow down.

Diario del Huila, Economy

Retail sales in Colombia have suffered a new contraction, registering a year-on-year decrease of 3.9% in January, according to data reported on Friday by the National Department of Statistics (Dane). This marked decline has led to retail sales experiencing eleven consecutive months of declines, thus reflecting the persistent economic slowdown in the country.

Although the drop in January was smaller than that recorded in December, which was 4.7%, the situation is still worrying. Eleven merchandise lines have reported negative annual variations in their real sales, especially highlighting the sales of clothing and textiles, as well as spare parts, parts, accessories and lubricants for vehicles. In addition, sales of motor vehicles and motorcycles have also experienced a significant decline.

Commerce in Colombia has been affected by various macroeconomic variables, including high interest rates, with the Central Bank’s benchmark indicator located at 12.75%, and high inflation that has exceeded the established goal by 3%. , reaching 7.74% at the end of February.

In the accumulated of the last twelve months until January, retail sales in the South American country have suffered a collapse of 6.9% compared to the same period of the previous year. These figures support expectations that the Colombian economy will maintain a moderate growth rate this year, projected at around 1.5% according to the Government. Although this estimate is more positive than the 0.6% expansion recorded in 2023, the economic outlook remains challenging for the country.

Merchants in Neiva report ample supply, but slowed demand.

Consumption continues to slow down

The commercial outlook remains challenging while consumption remains stagnant, according to the latest findings from a monthly survey conducted by Fenalco. February did not mark the start of a recovery, as most merchants reported that their sales volumes were the same or lower than the previous year.

84% of respondents reported that their sales were stable or decreased compared to the same month last year, with only 16% reporting an increase in sales. These results mark the worst February since 2017, reflecting a gloomy business climate amid a backdrop of economic uncertainty.

The reasons behind this slowdown are diverse and complex. Globally, the economy faces significant challenges, including the persistence of the COVID-19 pandemic, which has created uncertainty and affected consumer habits.

The restrictions imposed to contain the spread of the virus have had a direct impact on commercial activity, limiting the ability of businesses to operate normally and affecting consumer confidence.

At the national level, factors such as inflation, unemployment and insecurity have also contributed to the slowdown in consumption. Rising prices of food and other staples have eroded consumers’ purchasing power, reducing their ability to spend on non-essential goods and services. At the same time, economic and job uncertainty has led to greater caution among consumers, who have chosen to save rather than spend.

Reports from supermarkets and discounters suggest that sales have remained stagnant compared to the previous year, especially in durable and semi-durable products such as furniture, appliances, textiles and footwear. This trend reflects a broader trend of slowdown in the retail sector, which has been affected by a weak labor market and reduced consumer demand.

Despite efforts by some retailers to stimulate consumption through aggressive discounting, demand remains low. Credit access conditions are expected to improve in the second quarter, which could offer respite for consumers and stimulate spending. However, challenges remain for the sector, which faces a number of obstacles on its path to recovery.

One of the main challenges is the growing perception of insecurity, which has been identified as a worrying problem by a significant number of businesspeople. The escalation of threats and extortion from criminal groups has made commercial activity difficult, especially for wholesale distributors operating in peripheral and rural areas. This situation has generated an environment of uncertainty and has affected the confidence of businessmen, who are reluctant to make investments and expand their operations in such an unstable environment.

Not a new tax reform

Although what is known about the initiative for a new tax reform is that its objective is to try to reduce the nominal income rate of companies, 73% of businessmen consulted by Fenalco reject this possibility because it is not a good idea to transfer the tax sacrifice to natural persons, who suffered a drastic increase with law 2277/22.

The merchants also expressed the concerns that most bother them at this time in the country. In summary, the intensity of the problem of merchandise shortages has decreased, as has the increase in their prices, but the problem of low demand persists and the perception of insecurity is noticeably accentuated.

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