Retailers to feel crisis soon

By Debra Magallon-Estero

AN ECONOMIST has warned members of the local business community that the global financial crisis will soon hit the retail industry as problems of unemployment and foreclosure worsen in the United States.

Jose Arnulfo Veloso, treasurer and head of global markets for the Hong Kong Shanghai Banking Corp. (HSBC), said that even though many economists believe that the US recession will end next quarter, economic recovery is only “illusionary.”

“Durable good orders have increased because inventories are starting to go down,” Veloso said in an economic presentation he gave to members of the Management Association of the Philippines (MAP) last Friday in Cebu City.

“But if more people can’t spend to resuscitate the economy, this recovery will only be temporary,” he added.

Veloso presented data, which reveals that job losses in the US have resulted in a reduction of $34.4 billion worth of disposable income. Last month, US house prices continued to decrease by as much as 6.1 percent.

New inventory

Veloso compared the durable goods inventory to a freezer chest, where after all the stocks are consumed, people are now buying for new inventory. “This is what’s happening now,” he said.

In the country, Veloso said that it is possible that new orders of goods will start to come in while retailers in the United States start filling in inventories.

“The stocking of inventories in the US is good news, (but) whether it gets sustained is a different story,” Veloso said. He also said that the key to recovery is if banks will extend credit to the retail sector.

However, for the Cebu furniture industry—with the US as its biggest market—recovery still has a long way to go.

“Furniture is not a basic need so even if retailers start to put in new orders, it will be more of priority items like food,” said Cebu Furniture Industries Foundation (CFIF) past president Michael Basubas.

Basubas also told Sun.Star Cebu last Friday that the present situation of the export furniture industry is still difficult and no new orders are coming.

He said the industry has revised its forecast and now hopes for a recovery next year.

The CFIF had expected a recovery in the middle of this year.