DIY a bright spot for consumer spending

Pedestrians walk past shuttered and bordered up retails stores, amid the spread of the coronavirus disease (COVID-19), in Croydon, south London, Britain, September 27, 2020. (Reuters)
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Updated 28 September 2020

DIY a bright spot for consumer spending

  • In UK, sales volumes within household goods stores increased by 9.9 percent when compared with February

PARIS: Many retailers have been caught off-guard by coronavirus restrictions and shifting consumer habits, but DIY stores are enjoying a boom as people spend money on their homes and gardens.

A recent report by consulting group McKinsey found that faced with a prolonged period of financial uncertainty due to the pandemic, consumers “intend to continue shifting their spending largely to essentials ... and cutting back on most discretionary categories.”

Data has shown consumers worldwide are cutting back on clothing and shoes, but spending more to improve their homes.

In Britain, the sector has helped consumer spending overall to rebound to a level higher than before the pandemic hit.

“Spending for home improvements continued to rise in August as sales volumes within household goods stores increased by 9.9 percent when compared with February,” Britain’s Office for National Statistics said this month.

This shouldn’t come as too much of a surprise, as people are spending more time at home, and even when not under lockdown, many people are working from home or have fewer public activities to participate in.

A recent survey carried out in 20 countries by consulting firm Accenture found that over two-thirds of respondents expect most of their social activities will take place at their home or that of a friend.

The unease and concern that many people now feel in public spaces may push a lasting shift toward people spending more time at home, with Accenture even calling it a “decade of the home.”

Certainly many Germans have used coronavirus downtime to “repair, refurbish and decorate their homes,” the country’s BHB trade association for home improvement, building and gardening said in a recent report.

Sales in the sector rose by 15.6 percent year-on-year to nearly €12 billion ($14 billion) over the first half of 2020, boosted by the fact that many DIY stores and garden centers were allowed to stay open during virus lockdowns.

Turkey holds rates in surprise that sends lira to new low

Updated 22 October 2020

Turkey holds rates in surprise that sends lira to new low

ISTANBUL: Turkey’s central bank bucked expectations for a big interest rate hike on Thursday and sent the lira plunging to a record low by holding its policy rate at 10.25% and saying it had already made progress in containing inflation.
The bank, which also surprised last month when it hiked rates, said it would continue with liquidity measures to tighten money supply. It raised the uppermost rate in its corridor, the late liquidity window (LLW), to 14.75% from 13.25%. A Reuters poll of 17 economists had expected the bank to raise its key one-week repo rate by 175 basis points to address Turkey’s weak currency and double-digit inflation. Forecasts ranged from hikes of 100 to 300 bps.
The decision to leave the rate unchanged sent the lira down more than 2% to near 8 versus the dollar and prompted economists to question the central bank’s commitment to lowering inflation and its independence from the government.
“The (bank) is now back to a more unpredictable and opaque monetary policy framework. It appears as a severe miscalculation,” Per Hammarlund, chief emerging markets strategist at Swedish bank SEB.
The key policy rate remains below annual consumer price inflation, which stood at 11.75% in September, leaving real rates negative for lira depositors.
Turkey’s central bankers had surprised markets with a 200 basis point rate hike in September, the first monetary tightening in two years as it sought to rein in inflation.
Its so-called backdoor measures to rein in credit have raised the average cost of funding to 12.52% from a low of 7.34% in July. The LLW adjustment gives the bank more scope to raise funding costs.
“A significant tightening in financial conditions has been achieved, following the monetary policy and liquidity management steps taken to contain ... risks to the inflation outlook,” the bank’s monetary policy committee (MPC) said.
It said liquidity measures will carry on “until the inflation outlook displays a significant improvement.”
The lira touched a record low of 7.9845 against the dollar.
It is down 25% this year in a selloff prompted by concerns about high inflation and the central bank’s badly depleted FX reserves, and geopolitical worries including the prospect of trickier US ties under a possible Joe Biden White House.
Last month’s hike in the policy rate reversed a nearly year-long easing cycle in which it fell rapidly from 24%, where it was set in the face of a 2018 currency crisis.
“Last month the central bank took an important step to restore credibility and today’s decision seems like a step back. All this positive impact has been reversed significantly,” said Piotr Matys, senior EM FX Strategist at Rabobank.
Turkey’s economy contracted 10% in the second quarter because of the coronavirus pandemic and measures to combat it. Tensions in the Eastern Mediterranean and in the Nagorno-Karabakh conflict are also clouding the outlook.