Lebanon Retail Analysis - Second Quarter 2023 (Q2-2023)
Inflation slows down … Some sectors experience a regain of activity ...
The consolidated “nominal” retail trade turnover figures for the third quarter of 2023 showed a + 57.72 % increase in comparison with the figures of the third quarter of 2022 if we exclude the Fuel sector where a – 1.33 % drop was posted in terms of quantities sold. (This increase is in the nominal turnover figures and reflects variations before weighting with the CPI rates).
The + 57.72 % figure represents the rate of increase in turnover in Lebanese Liras before applying the proper weighting with the CPI for the period under review (between Q3 of 2022 and Q3 of 2023), and may be considered as an indicator of more activity experienced in some essential sectors, especially the supermarkets and food products sector as well as in the restaurants & hotels, tobacco and construction materials sectors, and to a lesser extent in the clothing sector.
But, after applying the proper weighting with the CPI for the period under review (+ 208.50 % between Q3 of 2022 and Q3 of 2023, as compared to + 253.55 % for the previous quarter), it appears that “real” turnovers continued to drop in all retail trade sectors. This drop was for the second consecutive quarter, slower than in previous quarters albeit at different levels according to the considered sectors, while quantities sold in the Fuel sector remained almost at the same level.
Thus, some sectors such as the supermarkets and food products sector, the pharmaceuticals sector, as well as the sectors directly or indirectly related to hospitality, have been witnessing some improvement as compared to the same period of last year, while other traditional sectors such as durables and non-essential products experienced a lower than expected activity.
On the other hand, and as indicated above, the CPI between Q3 ’22 and Q3 ’23 continued to reflect a high level of inflation (+ 208.50 %), albeit indicating a modest slowdown in the price increase from its + 253.55 % level experienced in the previous quarter.
Concurrently, the quarterly CPI increase between Q2 ’23 and Q3 ’23 shows a sharp deceleration in price increase, with a + 9.27 % figure only as compared to + 22.61 % in the previous quarter, and to the unprecedented + 81.40 % for the first quarter of this year.
Inflation Rates per Sector as per CAS figures between the 2nd and the 3rd Quarter of 2023:
On the other hand, the sectoral yearly inflation rates between the third quarter of 2022 & the third quarter of 2023 were as follows:
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Such declining quarterly figures did obviously have an encouraging impact although modest, on markets’ activity, at a time when non-encouraging political or economic developments failed to send any positive signs that could spark off a regain in optimism.
Another positive push was due to the transfer of BDL responsibilities to the vice-governor of the Central Bank and to his immediate declarations concerning the governance policies he intends to adopt. This move had a very positive impact on the prevailing morale in the markets, especially because the interim Governor made it very clear that he will not touch the remaining monetary reserves (that stabilized around USD 9 billion excluding Gold and Eurobonds), and after his success in maintaining a semi-stability in the value of the Lebanese Pound against the US Dollar.
All the above highly contributed to the stability, and sometimes even decline, in costs and prices, and resulted in reenergizing the level of activity in the markets.
In light of the above, markets’ consolidated figures did show, between the second and the third quarters of 2023, a “real” improvement of + 8.59 % (i.e. after weighting with the corresponding CPI – and following the decline of – 36.45 % posted in the previous quarter). This “improvement” figure excludes the results of the Fuel sector where a + 25.94 % increase was recorded in terms of quantities sold (certainly due to the additional demand during the summer season, by residents as well as by visitors who rented car).
These positive “real” results, that were quite noticeable in some sectors, were modest in many others in general, while a few did actually continue to experience a decline in activity, such as in the Supermarkets and Food sector (- 4.06 %), as can be seen below:
As a result, the quarterly inflation rate of +9.27 % for the third quarter of 2023, signals a “reasonable” improvement in markets’ activity during the summer season that can be described as having been relatively successful.
Such results did enhance traders’ positive expectations for the last quarter of this year, but reality comes to prove that not all expectations do materialize, with the eruption of the war in Gaza on the 7th of October and its direct and indirect repercussions on the situation in Lebanon during the upcoming festive season are not very optimistic.
2023 signal a “reasonable” improvement in markets’ activity during the summer season that can be described as having been relatively successful. Such results did enhance traders’ positive expectations for the last quarter of this year, but reality comes to prove that not all expectations do materialize, with the eruption of the war in Gaza on the 7th of October and its direct and indirect repercussions on the situation in Lebanon during the upcoming festive season are not very optimistic.