Retailers bracing for spending decline

New Year slowdown expected amidst economic uncertainty
Decline in product availability, reduced consumer purchasing power observed
Retailers concerned about continued volatility in external markets

Retailers are bracing for a slowdown in consumer spending during the upcoming New Year season amid weakening purchasing power and growing economic uncertainty.

Speaking to The Sunday Morning Business, Sri Lanka Retailers’ Association (SLRA) Founder President Hussain Sadique stated that retailers had already observed a decline in product availability alongside reduced consumer purchasing power in the lead-up to the festive period.

Against this backdrop, he noted that retail spending during this year’s New Year season was expected to fall compared to last year.

“We haven’t seen positive growth in spending,” he said.

He attributed the subdued outlook to heightened uncertainty stemming from the ongoing Middle East crisis, which has led consumers to adopt a more cautious approach to spending and avoid unnecessary expenditure.

“The mindset we are seeing is very watchful buying,” he added.

Looking ahead, Sadique warned that retailers remained concerned about continued volatility in external markets, which was driving up import costs and shipping charges, and was likely to translate into higher prices in the domestic market.

Meanwhile, recent inflation data reflects a gradual uptick in price pressures. The Colombo Consumer Price Index (CCPI) recorded a Year-on-Year (YoY) headline inflation rate of 2.2% in March, up from 1.6% in February.

Food inflation rose to 0.7% in March from 0.2% in the previous month, while non-food inflation increased to 2.9% from 2.3%.

On a month-on-month basis, the CCPI recorded an increase of 0.25% in March. The increase was driven by the Non-Food category, which contributed 0.52 percentage points, largely owing to the increase in prices of the Transport sub-category, while the Food category contributed -0.27 percentage points.

Meanwhile, core inflation (YoY), which reflects the underlying inflation trends in the economy, also accelerated to 2.5% in March from 2.1% in February.

source: The Morning