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This year, there are more pros than cons for retail sector

Though recent statistical data painted a rosy picture of household earnings, the upbeat mood has been spoiled to some extent by high inflation. Also, despite historically low unemployment rate, tax cuts and improved consumer confidence, it was a dismal show by the retail sector at the beginning of the year.

Meanwhile, a close look at the situation indicates there are no major constraints to people’s propensity to spend on non-essential items in the near future, other than inflationary pressure. So, the drivers behind the latest slump could best be termed as temporary and seasonal in nature.

Picture Courtesy: Nick Youngson

However, it’s a fact that retailers, in general, have witnessed softness in the sales of non-essential items, something that does not augur well for the sector that is already facing multiple challenges.

While transitioning into the current year, after leaving behind some of their sour experiences last year, one of the factors on which retailers had pinned their hope was stable consumer confidence. And that is a precondition for the futuristic facilities offered by them – ranging from one-tap order placing to cashless checkout – to be useful for the public in an effective manner.

The drivers behind the slump in retail sales could best be termed as temporary and seasonal in nature

In January, overall retail sales declined at the fastest pace in nearly one year, with a noticeable drop in the sales of automobiles, furniture and building materials. The dismal data followed a downward revision of the December figures, and the trend can be attributable to muted consumer spending.

The question is whether the present scenario is conducive enough for consumers to feel empowered to spend beyond food and other essential items. For one thing, the retail data does not complement the positive momentum in consumer spending, which is evident from the unusually strong holiday season. Inflation being the only negative factor that could have dragged consumer spending, the downslide of retail sales is unlikely to develop into a trend in the coming days.

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