As mentioned in this column on previous occasions, the crisis and its aftermath have brought forward numbers on economic activity that are surprising at times. Uncommon times are likely to provide unusual figures, for sure. But some may run against expectations or what conventional wisdom and previous experience might suggest. Consumption activities are an indicator of welfare and correlated with overall activity and income.
In times of economic predicament, they are expected to contract and will often keep shy until there are clear signs of recovery and general economic and family budgets regain confidence. In that frame, some of the results coming out on the domestic trade are somewhat puzzling and would deserve additional scrutiny and analysis.
For added context, remember that according to national accounts published for the first two quarters, private consumption has almost recovered to pre-pandemic levels; even has the economy, as measured by its top indicators, is still significantly depressed. There is an element of surprise in that, indeed, one that is reinforced by more detailed data on retail sales becoming available. Let us look briefly at some of them.
In 2020, data indicate retail sales dropped by more than 40 percent compared with the previous year. The severity of the contraction in 2020 and the virtual disappearance of external customers make such a drop even seem on the mild side. But the apparent recovery in the first half of this year is equally, if not more, surprising.
In the first quarter, total retail sales were just 9 percent below the level in the same period in 2019; and the second-quarter figure was even 15 percent above the equivalent figure in that year and on par with its highest values ever. However, as seen above, domestic demand is still below previous levels; and the economy is being slow to take off, as most of its most significant indicators emphasize.
Some of the most vibrant sales are indeed those mainly associated with visitors’ expenditure profiles. To pick some of the most obvious, leather goods, watches and jewelry, and phones all recorded sales more than 50 percent above their pre-pandemic levels. As visitors’ numbers keep persistently well below those seen before, these figures suggest remarkable changes in purchasing behavior. Yet, the driving forces behind such a ‘spending spree’ remain essentially unexplained. Where such buying exuberance comes from, it is not obvious. But that’s just another riddle posed by these challenging times.