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Retail sales rise but picture clouded


SALES AT big retailers and chain-store operators jumped 3.02 per cent in the first quarter of 2017, driven by a pick-up in the economy and adding to the positive business data emerging this year.

However, the Thai Retailers Association (TRA) yesterday played down the gain for the quarter from the year-earlier period, citing weak consumer spending that had not yet recovered. 
It also warned that if government stimulus – a key support for the sector – tapered off, sales growth at the big retailers could dip below 3 per cent for the first half of the year. Conversely, efficient government spending could boost growth to 3.2 per cent for that period.
The TRA monitors the sales of department stores, big supermarkets and chain-store operations. Sales in this sector, which it labels the modern retail segment, account for more than 32 per cent of the total retail spending in Thailand.
TRA president Jariya Chirathivat said the group’s forecast of first-half sales growth of up to 3.2 per cent was drawn from analysis of data for the services sector, which covers three industries: property and construction, banking and finance, and retail.
In the first quarter, profits in banking and finance stayed strong despite a rise in non-performing loans, while incomes and profits were flat, she said.
Property and construction showed slow growth, as indicated by the operating results of the top five listed construction companies that revealed reduced sales and profits. 
For retail, sales growth has been seen at the leading listed retailers, mainly driven by store expansion, while same-store growth is limited.
Jariya also noted that despite the slightly improved macroeconomic situation in the first quarter, it was not enough to spur significant growth in the various product categories.
Sellers of non-durable goods still face uncertainty, which is consistent with data from Nielsen, in its “Retail Landscape” report, showing that the fast-moving consumer goods sector posted slightly negative growth in the first quarter. Sales growth for durable and semi-durable goods remained stable but with no signs of a recovery emerging. 
The TRA reported its analysis of the sales growth in each segment it tracked for the first quarter.
1. Durable goods: This segment grew at just 1.25 per cent in the first quarter, reflecting a sluggish environment in the construction and housing sector.
Sales of home appliances grew only slightly because of a tightening in consumer credit. While sales under the mobile-phone and camera sub-segment grew by 3 per cent, volumes were small.
2. Semi-durable goods: This sub-sector showed slowing growth of 2.3 per cent, despite tourist arrivals increasing by 5 per cent year on year. The principal issue, the TRA says, is import duties on luxury goods that remain higher than those of Thailand’s regional peers, leading to slower growth in fashion, cosmetics and leather goods compared with last year. 
It also noted the impact of the nationwide mourning period for His Majesty the late King Bhumibol Adulyadej. Shopping on brand-name fashion remained in the doldrums, although sales of sportswear and healthcare products grew strongly.
3. Non-durable goods: Sales growth of 3.4 per cent in the first quarter was a highlight. Despite a slow economic recovery, growth in this sub-sector was maintained. Rising crop prices gave increased income to farmers, a key base of the non-durable segment, resulting in increased consumption.
The TRA says cash is clearly getting into the pockets of the grass-roots population, aided by more efficient government distribution of funds to the regions. The non-durable-goods segment has recovered significantly, contributing 68 per cent of total retails sales in the businesses that the TRA tracks.
The TRA notes that positive factors flowing into retail spending in the quarter included a 0.6-per-cent rise in the Consumer Confidence Index, export growth of 4.9 per cent, and the 5-per-cent increase in tourist arrivals. The increase in crop prices contributed to a 15.4-per-cent gain in the automotive market, with a 9-per-cent rise in motorcycle sales.
However, the TRA identified pressures coming from a lag in the start of the mega-projects planned under the government’s infrastructure push.
Additionally, private-sector investment has not recovered and remains reliant on state investment.
The TRA says reduced growth in both sales and profits reported by listed companies in the first quarter also was cause for concern.
Household debt is forecast to remain stable at 80.2 per cent of gross domestic product, under subdued household spending. Consumption of durable and semi-durable goods may slow down, the TRA says.
Some 14 million people work in the retail and service sectors nationwide, with 6.2 million in the retail sector. Last year, TRA members employed more than 450,000, recruiting about 45,000 people a year. 
However, the trade group warns of labour shortages in the retail sector, citing factors such as an ageing population. It wants to see legal changes to support more flexible hiring policies.
Chatrchai Tuongratanaphan, a TRA director, said the government was on the right track with moves to set up a database of lower-income people, after inviting people to register for welfare support.
He said that previously, the government’s mechanism for boosting consumer spending led to money mainly flowing to residents of urban areas. People in the rural areas often were not able to access these public funds.
“By gaining an accurate database of lower-income people, the government will be able to grant assistance and money directly to this group of people,” Chatrchai said.
 

Published : May 22, 2017

By : THE NATION

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