Consumers cut spending again

Malta’s consumers spent 4.2 percent less in July than they did a year ago, according to the National Statistics Office.  The volume of retail trade in July was even 1.7 percent lower than in June this year, and it was the second month running that retail sales fell.  Consumers’ abstention from buying more than what is strictly necessary shows that they prefer to save than spend.

Malta’s retail sales had the third highest drop amongst the EU27’s, where Portugal and Spain experienced the worst annual falls with 7.6 percent and 7.3 percent respectively.   Eurozone retail trade declined by 1.7 percent, whereas EU27 volume fell by just 0.2 percent.

Working-day adjusted deflated turnover shows an even more marked decrease.  In July, this was 8.6 percent worse than a year ago in Malta compared to just a 2.1 percent fall in the Eurozone.  Not only, but it was also lower than in 2009.

The decline in retail turnover in  the Eurozone is not surprising, given that the currency bloc seems to be headed for another recession, with growth contracting by 0.2 percent in the second quarter of 2012 following flat business activity in the first three months of the year. 

It is unlikely that we will see better figures next month, whether in the Eurozone and in Malta, given that other indicators are sending negative signals.  In fact, in August the Economic Sentiment Indicator (ESI) decreased markedly by 2.0 points in the EU, to 87.0, and by 1.8 points in the Euro area, to 86.1.   In both areas, the loss in confidence was particularly strong among consumers, retail trade and construction managers. In the services sector the loss in confidence was marked in the euro area but more contained in the EU as a whole. On the contrary, while confidence in industry decreased in the EU, it remained broadly stable in the euro area.

The changes in sentiment in Malta contrast markedly with those in the EU, in that economic sentiment in August improved by 0.9 points to 98.6, thanks largely to a significant improvement in confidence in services though even confidence in industry rose.  Yet, this did not extend to confidence amongst consumers, which deteriorated.

Last weekend, Prime Minister Gonzi warned voters not to forget the past, reminding them that “Dom Mintoff’s economic policies forced the Maltese to travel to Sicily to buy chocolate and toothpaste”.   It seems that, though Malta’s consumers do not need to do that nowadays, they don’t have much faith that Gonzi’s economic policies allow them to spend as much as they would like.