Why consumers are not buying

Between April 2008 and May 2012 the retail price index rose by 10% - from 96.81% in 2008 to 106.61 in 2012.

Over the last nine years, retail prices in Malta have increased by a whopping 36 percent – that’s more than double the average increase in the Eurozone and 11 percentage points more than the average increase in the EU27.

Normally, inflation occurs because the aggregate demand for goods and services grows more than the supply, and this is often accompanied by an increasingly tight labour market such that workers ratchet up their wages as employers compete for their scarcer resources.  But this has certainly not been the case in Malta, where consumer spending has been pretty weak and we do not have full employment, though certain skills may be in short supply.

It is easy to see why the EU economy is stalled.  Consumers just do not want to buy, scared as they are of what tomorrow might bring.  And, in spite of what PM Lawrence Gonzi may say about his successes, Maltese consumers are even more reluctant to spend than their European counterparts.

According to statistics released by Eurostat recently, retail trade in April fell by one per cent over the previous month in both the EU27 and Eurozone.  But that in Malta decreased by 2.4 percent.  Over the last six months, retail sales in the EU and Eurozone slipped by 0.8 percent and 1.4 percent respectively on average over the previous months, but those in Malta went down by 7.3 percent on average.

An annual comparison reveals that retail sales in April were 2.5 percent and 1.9 percent less than a year ago in the Eurozone and EU27 respectively.  Retailers in Malta suffered even more, as they saw their trade decline by 4.6 percent.    The worst results were in the Iberian Peninsula, with a 9.6 percent fall in Spain and a 9.3 percent decline in Portugal, whilst retailers in  the Baltic states, where Estonian retailers had a field day with an increase of 8.5 percent and those in  Latvia enjoyed a 7.8 percent increase.