Analyst projections are in line with entrepreneurs and SMEs. “The last time the Now 12 rate was adjusted, billing for the program fell 25%. The most impacted categories will be clothing and household appliances, which are not usually purchased without quotas,” explained Sofia Ruano, a consultant in mass consumption. In any case, she explained that when consumption is analyzed, the panorama is heterogeneous, due to the income situation.
“Only registered employment beats inflation in some periods, so in that segment a rate movement may have little impact. But unregistered workers, who in the last figure for March were 15 points below inflation, if you raise the rate by 11 points on top of that, it will have a greater impact”detailed Ruano.
Along the same lines, Santiago Manoukian, economist at Ecolatina, estimated that private consumption as a component of GDP is going to “weaken”, despite having grown 9% year-on-year in the first quarter, with an acceleration of inflation that had a “pro-consumption” bias. The protected salaried sector closed parity in averages of 60%, against an estimated inflation of 70%. While the informal, directly without parity, have greater loss of consumption due to the “regressive dynamics” of inflation, which in this 2022 had food well above the general level. “In the sectors with fewer resources, the clearest impact of the drop in consumption is already being seen, as happened with supermarket sales,” he added.
Under the wing of the Minister of Economy, Martín Guzmán, the Secretary of Domestic Trade, headed by Guillermo Hang, renewed the Now 12 with new rates. Payments in 3, 6 and 12 installments go from 33% to 42% of annual nominal rate, while, for 18 and 24 fixed installments, it grows from 38 to 49%. The rise in consumption is in line with the policy of the Central Bank, which raised interest rates for the sixth consecutive time.
The measure comes after the Now12 reached the second highest consumption peak since the series that prepared the CEP XXI began. The latest data shows that billing grew 99% in real terms on an interannual basis (between May 6 and June 6, 2022 against 2021, where the Hot Sale took place). In the home appliances and technology category, sales registered the highest peak of the entire series at the end of May, which begins in 2019, due to white line sales. The Now12 represents 1 out of every 4 pesos spent with a card, according to the Prism Index.
Therefore, the impact of the measure is also macroeconomic. “As much as the rate remains negative and attractive, given that the cards are at 75%, this is an overshoot for Now12. For the first time, the yields are positive for the fixed term, so what is being sought is to cool down consumption”, analyzed Manoukian. In fact, although the statement from the Ministry of Internal Trade speaks of “continuing to promote the expansion of family consumption”, it also ensures that it seeks to establish a “harmonization with the rate structure of the system in order to strengthen exchange rate stability”.
On this point, Manoukian assured that the limits to consumption are not only due to inflation and real wages, but also on the supply side. “The government cannot meet the reserve target at the same time with the current level of imports. The limit to expand activity in general, and consumption in particular, is limited by the stock of reserves, which will mark if the companies have dollars to import”, he detailed.
Consultants such as Eco Go estimate a 2022 with low private consumption, with a year-on-year rise of around 2%, explained by the “acceleration of inflation and the loss of purchasing power,” analyzed Sebastián Menescaldi, director of Eco Go.
Source: Ambito
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