Spending slows; purchases more on food, health items

The lockdown of Luzon amid the coronavirus (COVID-19) pandemic is likely to take a heavy toll on the consumer and retail sectors, but higher food, beve­rage and health spending can help shore up overall household spending for the full year, think tank Fitch Solutions said.

In a research note dated March 31, Fitch Solutions said it was expecting consumer spending in the Philippines to grow at a slower pace of 6.7 percent this year, down from 9.8 percent last year and the original growth forecast for the year of 7 percent set prior to the COVID-19 outbreak.

“As we have seen in China and South Korea, as well as our predictions for consumer spen­ding outlooks in UK, Italy and Malaysia, we believe that consumers will increase their purchases of food and drink from groceries and supermarkets as the lockdown forces them to cook at home,” Fitch Solutions said.

This can be in the form of purchases from supermarkets like SM Supermarkets, Robin­sons, Metro, All Day Supermarket—which are allowed to remain open, as part of essential services—or from online delivery platforms that deliver mostly grocery products, such as MetroMart, Lazmart, The Green Grocer, PushKart, the research said.

Consumer purchases can also be via delivery platforms that deliver specific goods like Pacific Bay (seafood), The Ve­gan Grocer (vegan food), Ge­rald (baked goods) and Boozy (alcohol), it added.

Fitch also expects more over-the-counter medication sales, with consumers seeking medicine and health-related purchases during the pandemic.

On the other hand, Fitch Solutions has a grim outlook on the following consumer cate­gories: clothing and footwear, furnishing, transport, recreation and culture and restaurant and hotels.

“[Metro] Manila has ordered that restaurants stop serving dine in customers, and hotels have not been allowed to accept new bookings for foreigners since March 17, it is therefore not surprising that we expect spending in these categories to decline. How­ever, we note that there may be some possible cushioning to this outlook for restaurants and hotels as restaurants are still able to serve takeout or food delivery customers,” the research said.

The research noted that there were at least 50 restaurants and restaurant chains, such as Dominoes, The Sandwich Guy, Bonchon, Saboten—mostly in the urban metropolitan areas—still actively advertising takeout or food delivery services. It no­ted that fast-food giant Jollibee had even gone one step further, offering to deliver ready-to-cook items.

Hotels, on the other hand, are now seen to cater to Filipinos returning from overseas who are required to spend a period of time in quarantine.

“Given the monthlong lockdown on nonessential busines­ses, retail shops (such as clo­thing, home, electronics) will suffer, as they lose out on an entire month’s worth of sales revenue. However, some retai­lers may be still able to generate some amount of sales if they can get onto grocery delivery platforms. Items from Toy Kingdom and National Bookstore, for example, are able to be delivered together with Metro Mart purchases,” the research said.

The research noted that Luzon was home to over 50 percent of the country’s population and was responsible for 73 percent of the country’s total economic output.

“The lockdowns are currently scheduled to remain in place until April 12, but could be extended, given initial difficulties implementing the measures and confusion over what restrictions were in place. However, in their current state, the lockdowns have been quite drastic, with strict quarantine, suspension of public transport, school closures, bans on foreign tourists, and shuttering of nonessential businesses (any business not provi­ding basic necessities like food, medicine, power, credit, water and telecommunications),” according to the research.