January consumer spending still in negative territory

3 feb 2010 Ziarul Financiar

Sales on the main consumer goods markets, food, drinks, electrical home appliances, furniture, apparel and cars, where 20 billion euros are generated annually, continued to go down in the first month of this year against January 2009, so that no signs of a consumption rebound emerged in January.

ZF asked companies in these industries for data to see how the start of the year is shaping up, considering forecasts for 2010 point to 1-2% economic growth, after last year's over 7% decline.

Entrepreneurs and executives say consumers are now buying only discounted products, which is seriously hurting their profit margins.

Still, consumer goods producers expect increases starting the second half of this year, but avoid providing forecasts because "markets are still slightly unstable", according to the representatives of Pepsi Americas, the second biggest player on the soft drinks market.

"The bottom has been already hit and this is why I expect to see the FMCG market's decline come to a halt this year. There may be at least stagnation in consumption or an increase of around 2-3%," explains Marius Caluian, general manager of MEMRB market research firm.

"Experts' forecasts about the Romanian economy slightly contracting in the first half of 2010 are strengthened by the sales trend of the first month of this year," say the representatives of Real, the second biggest hypermarket network domestically in terms of the number of locations. Real hypermarkets are a good consumer-spending barometer especially for cities.

"January turnover is 1% smaller year-on-year. It's a natural trend, following the trend of the entire 2009, as the crisis did not end on the 31st of December but will unfortunately go on for a long time," said Alin Giurea, chairman of Pambac Bacau, a player on the bakery and pasta market.

Fashion retailers face the same downward trend as last year despite massive reductions. The furniture market is not faring any better, either, after a slump of above 15% last year and massive layoffs. The start of the year did not bring encouraging signs for electronics and electrical home appliances retail, either. For car market players, January brought gloomy statistics about 2009 sales and a worsening outlook for the following months.