At this time of year, many people flock to the shops to do their shopping for the mid-year vacation of schools and universities when many go on holiday. But this year usually bustling shopping centres are not bustling. The annual winter sales have been brought forward this year to start in mid-January instead of the first week of February in order to encourage people to buy after they shied away from doing so following the floatation of the Egyptian pound late last year. The floatation of the pound accompanied by the recent cuts in fuel subsidies and the implementation of the new value added tax (VAT) have led to significant increases in prices across the board, cutting consumer purchasing power. Inflation in December jumped to 24.3 per cent, compared to 20.2 per cent in November, reaching its highest point in at least seven years, according to figures from the Central Agency for Public Mobilisation and Statistics (CAPMAS). CAPMAS ascribed the surge in inflation to price hikes in basic goods and services, saying that the cost of foodstuffs and beverages rose by 5.2 per cent in December compared to the preceding month and 29.3 per cent year-on-year. Transportation costs also increased by one per cent from last month and 22.8 per cent year-on-year. “Every single item on my household list has increased in price,” said Doaa Adel, a private-sector employee and the mother of two children. “I have had to dispense with some items such as new clothes to make ends meet,” she added. Rana Essam, a 25-year-old employee, said that despite the fact that she does not have family obligations she has also had to refrain from much shopping this year. “Prices have risen ridiculously. I am now supposed to pay double the price I paid a few months ago,” she told Al-Ahram Weekly. Essam said that discounts were not helping as they mostly varied between 15 to 30 per cent, still making prices higher than last year. Shops and garment producers are feeling the pinch, saying that sales this winter season are very low. “Only 15 per cent of merchandise has been sold so far,” said Yehia Zananiri, deputy head of the Garments Division at the Federation of Egyptian Chambers of Commerce. He said that the ongoing sales had not been working well for the shops and they had failed so far to invigorate the market. He attributed this to the delay in the formal announcement that the sales had kicked off, a task carried out by the Ministry of Supply. Zananiri said the Federation of Chambers of Commerce had informed the ministry that the sales would start earlier than usual in mid-January in a bid to give a boost to the stagnant market. He added that the ministry had not objected, but shops and producers had been surprised that the ministry had not announced the beginning of the sales. It would do so on 29 January, coinciding with the start of the mid-year vacation, he said. Another reason for the stagnation was the feeble purchasing power of Egyptian consumers as a result of the last wave of price increases, Zananiri said, adding that many households were not buying new clothes as they were giving priority to other needs. “If this stagnation drags on, the situation will be catastrophic for the industry as factories will be no longer be able to produce because they can't sell their merchandise,” he told the Weekly. It would not only harm producers, but could also harm the economy overall, which relies on private consumption for growth. Economic experts said that although devaluing the currency and other reforms such as implementing the VAT would likely be positive developments in the long run, they could lead to significant declines in consumption as a result of increasing burdens on consumers, thus negatively impacting economic growth. The International Monetary Fund (IMF) expects four per cent economic growth in Egypt in the 2016/2017 fiscal year. Some consumers are not happy with the ongoing discounts either, saying that they are not enough, but Zananiri said that the discounts were good in the light of the current stagnation that prevented shops from offering larger sales. The discounts range from 20 to 50 per cent. He said the sales were intended to offer discounts on merchandise that had remained unsold during the season, as it was better for shops to sell this at low prices than risk not selling it at all. Normally, shops sell around 80 per cent of their merchandise and offer discounts on the remaining 20 per cent, but this season, the situation has seen the contrary phenomenon, Zananiri said. “We have 90 per cent of merchandise unsold in some cases, so it's hard for shops to offer large discounts as they will incur losses this way,” he said. Many people are refraining from doing much shopping this year because of the large increases in garment prices. Zananiri said that the hikes in prices had been inevitable after the floating of the pound. The prices of production inputs had increased, he said, such as those of fabrics imported from abroad. Locally produced garments had increased by 50 per cent, while garments imported from abroad had increased by 100 per cent, he said, equivalent to the increase in the dollar rate against the Egyptian pound. The dollar is now trading at around LE18.5 in the banks, compared to LE8.8 before the floatation. Zananiri said that producers were putting their hopes in the current sales to boost their sales by 40 to 50 per cent. “We hope things will get better with the official announcement of the winter sales,” he said.
