3rd & 4th Quarter Still In Recession
The food industry has been relatively protected during the initial recession because of inflationary aspects. This means turnover remained more or less the same, sometimes even increased whilst physical volumes were dropping. Now that we are experiencing price deflation along with volume reduction we will see the full effect of the recession.
My business has year on year seen a 6% increase in turnover Jan to July 08/09. Yet food inflation is officially at 10.2% already – down from the last 12.3%. So strip out the inflation portion and technically you are losing turnover. This is were we find ourselves at the moment .
Food prices are dropping and so is turnover, so until volumes pick up we will continue to see a reduction. I predict that this will only start happening in end October through November and into the second week of December. Then the bottom will fall out again as it does every year until end February – mid March 2010.
So my warning to you the consumer is this: you’d better start spending cause with turnover down, operational costs up and a bleak outlook short to medium term, retailers are going to be forced to slow food price reductions in order to cushion the profit margin losses!
Todays’ Stats SA GDP figures show a further 3% contraction in the second quarter. I therefore assume we need to see real growth of over 10.6% just to get back to were we were. When all is said and done, we are in for a very tough ride!