Inflation seen as drag on retail industry recovery

THE retail recovery is being hindered by high inflation, which is causing consumers to carefully consider their purchases, an industry group said.

Paul A. Santos, Philippine Retailers Association chairman, told reporters on the sidelines of the Economist Impact’s Global Anti-Illicit Trade Summit in Taguig City last week that consumers are keeping their spending in check.

“The biggest dampener to the economic recovery for the retail (sector) is inflation. We’re seeing a lot of consumers… realizing that stuff is more expensive than it used to be and are now prioritizing what to spend, how much to spend,” Mr. Santos said.

“Inflation puts a damper on the prospects of recovery and improvement in the retailing business,” he added.

The inflation rate slowed to 6.6% in April from 7.6% in March, the Philippine Statistics Authority said in a preliminary report. Inflation remained higher than the year-earlier 4.9% and above the government’s target range of 2% to 4%.

According to Mr. Santos, retailers are posting stronger sales following the reopening of the economy, but have yet to surpass pre-pandemic levels due to inflation.  

“A lot of reports suggest that retailers have enjoyed an increase in sales but have yet to achieve sales levels matching that of 2019. Some forecast that they will be able to match sales by the yearend,” Mr. Santos said.

Mr. Santos said retailers are responding by offering more promotions and are cutting costs.

“You go back to old tools to revive business. Some retailers will probably engage in more promotion throughout 2023 to attract lost business,” Mr. Santos said.

“Some retailers will probably, to improve the bottom line, engage in cost reduction. Probably, in this case for most unprofitable stores, reduce operating hours or maybe reduce employees. That’s the last option,” he added. — Revin Mikhael D. Ochave