Households starting to feel negative effects of high inflation

The negative effects of high inflation are starting to become more and more noticeable in the consumption behaviour of households, UniCredit Bank analyst Lubomir Korsnak stated in a comment on the retail revenues data for February published by the Statistics Office on Tuesday.
"The composition of the decline, which is primarily driven by usually more stable food sales, is somewhat surprising. The explanation for this relatively atypical phenomenon could be the structure of inflation, which is being driven by food. This has a negative impact especially on low-income households, which are forced to adjust the consumption of basic items of the consumer basket, which foods undoubtedly represent. It needn't be just a direct reduction in consumption; it could also be a regrouping of food purchases towards cheaper and usually lower-quality alternatives," he noted.
According to the analyst, unlike retail, revenues in hotels and restaurants grew in February. However, the increase was mainly of a technical nature and was only a natural correction of the extremely weak January, whose figures were affected by the record warm turn of the year. Sales and repairs of cars also recorded higher revenues in February.
Korsnak further stated that consumption will continue to hit its limits in the coming months, mainly due to record inflation. "When the financial cushions of the lower-middle and low-income group of households have been exhausted and the Christmas effect has worn off (with a higher motivation to reach for savings), we expect a further dampening of household consumption in Slovakia," added Korsnak.
The Statistics Office reported earlier in the day that revenues in retail fell by 2.5 percent y-o-y in February. This negative balance was mainly influenced by the most significant retail component - hypermarkets and supermarkets. Although the nominal value their revenues was higher than last year, it declined by 4.3 percent in fixed prices. (TASR)