Mass consumption will close the year positively, but a sharp drop is expected for 2024

Anyway, The outlook for the near future is not encouraging.. The recent measures adopted by the Government will tend to erode the purchasing power of salaries and, consequently, will impact consumption. In this way, a retraction is expected for 2024.

According to the survey by the consulting firm Scentia, In November, “self service” presented a positive variation of 7.7% year-on-year, to accumulate an improvement of 2.6% in the first eleven months of 2023 compared to the same period last year.

In the big chainsyear-on-year growth in November was 10.4%, and accumulated an increase so far this year of 9.3%. In independent self-service stores, the improvement was 5%, but there is still a decline of 3.6% in the first eleven months of the year. It is due, above all, to the price gap that was exhibited for a good part of 2023 between both sales channels, based on the official programs.

One of the factors that can explain the growth in mass consumption in recent months was the “hedging effect”, in a context marked by inflationary acceleration and political uncertainty around the presidential elections.

And the trend continued during the first days of December, prior to the inauguration of Javier Milei. “Until the 10th, consumption in supermarkets was positive”, Osvaldo Del Río, director of Scentia, told Ámbito, who in turn projected that the last month of the year would also close with growth. In this way, he estimated, 2023 would culminate with an improvement of “between 1.5 and 2%.” It would be the second year with a positive variation, after the 1.9% growth recorded in 2022 compared to 2021, according to the same survey.

Mass consumption: what to expect by 2024

The scenario will be different in 2024. “The forecasts speak of a contraction of approximately 5%,” Del Río pointed out. Consumption will be affected next year by a marked drop in the purchasing power of salaries.

In fact, the consulting firm Equilibra projected that Real wages will fall “by 9% on average” during 2024. The first months of next year could be the most complex, since different analysts estimate inflation that will be around 20% monthly.

The decline in domestic demand will also be reflected in a drop in economic activity, which they estimate at around 4% by 2024, despite the good projections provided by the agriculture and extractive sectors. The thing is, as a recent Ecolatina report pointed out“private consumption explains 70% of GDP.”

In this regard, the consulting firm Sarandí analyzed that “The express objective of the Caputo Plan is to induce a drop in activity in 2024.” “They estimate it between 4% and 5% of GDP, and it will be widely disseminated among the different blocks of aggregate demand. They hope to discipline prices due to the lower power of consumption and investment, in a context of falling employment and production. As a hypothesis, Milei’s team believes that the drop in activity will also slow down the speed of money circulation, which today is out of balance due to the repudiation of pesos. A smaller economy, with fewer real transactions and with certain wage discipline through unemployment, can decompress price tensions,” the firm highlighted.

In fact, the measures announced by the Minister of Economy last week provoked a rapid reaction in some sectoral chambers. This was the case of CAME, who warned that “the devaluation will cause a substantial change in the relative prices of the economy which, added to the removal of subsidies and investment cuts in infrastructure, will significantly impact the consumption capacity of citizens.””.

And they highlighted: “We cannot ignore the fact that SMEs operate mainly in the domestic market and that these measures will inevitably have an impact on the level of activity. A sharp drop in this could lead a large part of our companies to an economic deficit that is difficult to sustain.”