Softening inflation has downside

Happy days may be ending for discount retailers DALI and O-Save as their appeal diminishes amid the moderating inflation.

Puregold saw its margins take a hit last year as it tried to remain competitive against DALI, according to market pundits.

Benign inflation has reduced downtrading, which was cited by Monde Nissin as one of the reasons for the decline in its market share in biscuits the past two years.

Now that consumers have more capability and willingness to spend, Monde’s flagship products — Skyflakes, Fita and Lucky Me! noodles — will likely strengthen their dominance in their respective segments, according to AP Securities.

Consumers remain cautious based on Bangko Sentral ng Pilipinas’ Consumer Expectations Survey (CES) for the fourth quarter which showed some improvements in consumer confidence for the current quarter improving by 4.5 percentage points to -11.1, from last quarter’s -15.6.

This reflected a gain in the number of optimists, attributable to several factors such as higher and additional sources of income, more working family members and, lastly, more available jobs and permanent employment.

While this marks a massive improvement relative to pandemic levels wherein the index was hitting sub-negative 50, the current quarter’s negative number is still much lower than the pre-pandemic’s positive 1.3.

The outlook for both the next quarter and the next 12 months also posted gains of 3.5 pts and 2.5 pts, respectively, which continues to put the numbers at positive levels of 4.2 and 12.4, respectively.

Indicators are turning positive for retailers, according to market analysts.

While the Philippine Statistics Authority recently reported that inflation accelerated for the third consecutive month to 2.9 percent, inflation remains well within the BSP’s two-percent to four-percent target range and the overall downtrend remains intact.

The Regional Tripartite Wage Productivity Boards also approved wage increases ranging from P21 to P75 per day for all 4.9-million minimum wage earners. This will be executed in two tranches, the first of which will be effective on 12 January 2025 while the second tranche will start on 1 July 2025.

Once this string of wage hikes takes effect, we believe this would result in the stimulation of consumer spending which in turn would push gross domestic product higher to our estimate of 6 percent for the year, aligning with the Department of Budget and Management’s 6 percent to 7 percent forecast.