The final stretch of the year brings the greatest resistance test of private consumption: the Black Friday and Christmas campaigns. After the shock of the pandemic, this edition comes with the challenge of inflation and a brake on spending that is already noticeable in the vast majority of sectors. The buying euphoria that accompanied the end of the covid restrictions is deflating just at a key moment for trade, so the alert is maximum.
“Household consumption is likely to decline in the fourth quarter of 2022 relative to both the third and fourth quarters of 2021. More inflation, more expensive financing and greater uncertainty about the economic situation would bias household spending downwards. families in the final stretch of the year”, consider Miguel Cardoso and Juan Ramón García, Chief Economist and Principal Economist at BBVA Research, who have just completed the entity's latest report on Automobile Consumption and Sales.
The impact of the rise in prices and the uncertainty due to the war makes a dent and the great recovery in private consumption that was seen in 2021, from 6%, falls to the 1% expected for this year. The loss of dynamism in spending in this third quarter and the estimates for the rest of the year have led to a downward revision of the growth in spending both for 2022 and in the forecasts for 2023.
“The slowdown we see in consumption is explained by the exhaustion of the impact of the reduction of barriers to meeting, by the war, and inflation; For the following year, private consumption will grow marginally, only 0.9%, that is, 1.5 points below previous forecasts”, underline Cardoso and García. In this context, private consumption is the main responsible for the slowdown in economic growth in Spain, they point out.
In the commercial sector there is an unwritten rule that is usually followed. If the sales of the first half of the year are correct, the Christmas campaign will be a success. Some of the main commercial operators consulted cling to this. The billing until the summer has gone well and they cross their fingers so that the clients throw the rest this end of the year despite the skyrocketing increase in prices and global uncertainties.
BBVA economists maintain in their analysis that hope for the sector is not lost. "The consumption adjustment could be reduced or even zero if households use part of the savings accumulated since the beginning of 2020," they point out. The savings accumulated by households since the first quarter of 2020 is close to 130,000 million euros, "which will allow softening the effect of the increase in prices and interest rates on demand," they indicate in the analysis.
In fact, households are in a better position to face the increase in financing costs than in the 2008 crisis, they continue, because they start from historically low rates, "with a good percentage of the loans negotiated with fixed payments and a part of the balances with a high seniority”. "With employment resisting and wages increasing, nominal disposable income will grow," they predict.
The pothole, they conclude, will be relatively short and of moderate magnitude if the effects of the war do not go further. The problem is that the turbulence occurs right in the middle of a crucial sales campaign. The decision on what to spend that accumulated savings will become more important than ever for the commercial sector.
