Gloom ahead for retailers

The atmosphere was not really optimistic at the annual conference of the National Association of Retailers. Recession is felt in practically all segments of the retail business.
According to Péter Feiner, chairman, consumption dropped in 2007, as well as the GDP, while inflation accelerated. Purchasing power is expected to continue shrinking in 2008. It was no surprise that households began cutting their food spending in the second half of 2007. At the same time, food prices rose. Spending on food was down by 3 per cent in the second half of 2007. Last year’s trends are expected to continue in 2008. According to Ferenc Karvalits, vice president of the National Bank of Hungary, the performance of the retail sector has been below that of the economy as a whole since 2006. He recommended cost cutting measures for the sector, as increasing prices is not a sound alternative. He does not see the recession ending before 2009. István Tari, head of division from Erste Bank, said that the retail sector was most adversely effected by the negative developments seen in 2007. He also mentioned the problem of slow payments, with payment periods now averaging 105 days as one of the most serious ones for suppliers, many of which will end up bankrupt, as a result of insufficient financing. According to György Raskó, agricultural market expert, the agricultural sector of Hungary and the EU is in crisis. A shortage of fodder is threatening in 2008. The world stocks of wheat and oily seeds are only enough for two months and prices can easily rise further. Increasing fodder prices will probably lead to an increase in the prices of meat products as well. It remains to be seen if the retail sector will absorb the price rises to come from the bakery industry and the meat industry, or not.