Retail sales growth in commodity-rich developing countries has slipped to its lowest level for six years, according to new research, underlining how broader economic malaise has hit consumers’ pockets.
The slowdown in consumer spending - which is particularly pronounced in Russia, Brazil, Colombia, Chile and South Africa - shows how the impact of lacklustre commodity exports is weighing increasingly heavily upon shopping habits in the developing world.
“The commodity slump has delivered a big hit to incomes in commodity producing countries, and that is keeping people from being able to go out and spend,” said Mark Williams, chief Asia economist at Capital Economics, a research company.
Retail sales growth in developing countries that are net exporters of commodities slipped to 2.6 per cent in May from 2.7 per cent in April, according to a three-month moving average compiled by Capital Economics.
It marked the lowest level since October 2009, when retail sales growth averaged 2.2 per cent and was well off the 6.8 per cent growth registered in May last year.
It comes as economic growth in the developing world has declined to its lowest ebb since the financial crisis.
Overall emerging market GDP growth in May fell to 3.5 per cent, down from 3.6 per cent in April and well off a post-crisis peak of 10 per cent in 2010, the company added.
In an illustration of how significant the pass-through effect from dwindling commodity exports has been, average retail sales growth in those emerging markets that are net importers of commodities held up in May, rising 7.7 per cent compared with 7.4 per cent in the same month a year ago.
Overall, average retail spending growth in emerging markets dropped to 5.9 per cent in May, down from 6.2 per cent in April - highlighting the strength of flagging consumer activity in Latin American and emerging European commodity exporters.
Much of the outlook for commodity exporting emerging markets depends on demand from China, where investment-driven growth has slowed precipitously. There was more gloomy news for the Chinese economy last week as the manufacturing purchasing managers’ index - an indicator of manufacturing activity - slipped to its lowest level in 15 months in July.
The news helped depress the price of copper briefly to a new six-year low. Iron ore prices were also subdued, but off six-year lows hit earlier this month. Brent crude hovered at around $55 a barrel, near a four-month low.
Lower prices of key commodities are set to exert further pressure on the export earnings of commodity producing countries, analysts said. In May, emerging market exports fell by 13.8 per cent year on year, compared with a 14.3 per cent drop in April - with much of the fall deriving from a lack of demand.
The heaviest falls in exports have come from several of the most commodity-dependent countries, such as Russia, Colombia and Peru. Nevertheless, Capital Economics expects emerging market export growth to reach a trough soon, partly because the fall in commodity prices in the latter part of last year will provide a weaker base for comparison.
— Financial Times