retail activity indicators | second half of 2016
RETAIL OBSERVATORY
LFA - CCIABML
RETAIL ACTIVITY INDICATORS LEBANON | SECOND HALF OF 2016
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retail activity indicators | second half of 2016
RETAIL ACTIVITY INDICATORS SECOND HALF OF 2016 FOURTH EDITION
A semi-annual report prepared by
LFA Implementing Partner
Published by the Retail Observatory at the Lebanese Franchise Association © 2016 All rights reserved | Lebanese Franchise Association and QuantAnalysts s.a.r.l. February 7, 2017
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RETAIL ACTIVITY INDICATORS
SECOND HALF OF 2016 | fourth EDITION CONTENTS 07 08 11 17 21 27 41 71 89 93
Acknowledgements Executive summary Foreword Introduction I. Methodology II. The economic backdrop III. The indicators IV. The analysis Concluding notes Views from within • In Nine Answers • Supporting retail activity calls for internal trade reform
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Opinion Elusive prosperity, receding prospects
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Appendix • Categories and sub-categories of retail goods and services for which sales indicators were built • Monthly retail sales indicators for consumer goods • Quarterly retail sales indicators for consumer goods • Half-yearly retail sales indicators for consumer goods • Yearly retail sales indicators for consumer goods
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retail retail activity activity indicators indicators | second | first half of 2016
ACKNOWLEDGEMENTS
The Lebanese Franchise Association (LFA) and QuantAnalysts s.a.r.l. are grateful for the valuable technical assistance the Industrial Research Institute (IRI) has offered to the Retail Observatory and to the retail indicators project. The LFA and QuantAnalysts are indebted to Dr. Nabil Fahed for the valuable support and constructive advice he continued to offer to the project. Special thanks go to Ms. Nour Nasr for putting her expertise in quantitative methods at the disposal of the project.
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EXECUTIVE SUMMARY The retail sales performance indicators for 2016 1. The fourth edition of the LFA-CCIABML Retail Activity Indicators presents sales indicator data for the second half of 2016 and reviews and analyses data for the year as a whole. 2. The overall retail sales indicator for the nine categories of goods and services was down 0.75 percent in 2016 compared with its previous year’s level. This confirms the fact that the retail activity’s minimal rates of improvement witnessed in 2015 have failed to create recovery momentum in 2016. 3. The overall retail sales indicator for 2016 remained 10.23 percent below its 2012 base year level. 4. Of the nine categories of consumer goods and services included in the report,
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the sales indicators for three categories moved up whereas six categories saw their sales indicators decline in 2016. 5. The sales indicator for food and beverages rose by 14 percent in 2016 from its 2015 level, but that indicator remained 5.27 percent below in 2012 base year level. 6. The sales indicator for sports and hobbies was up 4.12 percent in 2016, but remained a broad 36.11 percent below its base level. 7. The sales indicator for medical services was up a moderate 3.65 percent in 2016. That indicator exceeded the base year level by 40.04 percent. 8. The sales indicator for the fashion and clothing category of retail declined by 5.62 percent in 2016 and remained 32.52 percent below its 2012 base level.
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9. The sales indicator for cosmetics was down by 1.88 percent in 2016. 10. The sales indicator for household goods was 1.5 percent lower in 2016. In four consecutive yearly declines, that indicator fell by a combined 34.98 percent below its base year level. 11. The sales indicator for luxury goods was 6.11 percent lower in 2016 and remained at 40.08 percent below the 2012 base year level, the broadest negative gap from base. 12. The retail sales indicator for hospitality services retreated by 3.8 percent in 2016 and remained 0.49 percent short of the 2012 base year level. 13. The retail sales indicator for tourism services fell 8.73 percent in 2016, the broadest decline for the year. 14. The recurring surge in retail sales in
December 2016 was disappointing for five retail sectors. Thus: 15. · the sales indicator for fashion and clothing was 5.56 percent lower in December 2016 compared to its December 2015 level; · the December 2016 sales indicator for cosmetics was down 24.07 percent from its December 2015 level, the broadest December year-todate decline registered among retail categories examined in the report; · the December 2016 sales indicator for luxury goods was down 8.2 percent from it level in the corresponding month in 2015; · in December 2016, the sales indicator for hospitality services fell 8.9 percent below its December 2015 level; · in December 2016, the sales indicator for tourism services was 22.19 percent lower than its December 2015 level, the second broadest year-to-date decline among retail categories covered.
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16. The report adopted a number of separate but complementary statistical approaches to interpret the retail sales performance indicators. Of these approaches, the de-seasonalization of indicator data and the use of two alternative representations and analyses of the trend are particularly helpful in imparting intuitive as well as technical significance to the time series.
time series. The longer time series enhance the reliability and robustness of the seasonal adjustment procedure and correlations. In trend analysis, the longer time series have made possible the addition of a non-linear approach to trend analysis.
17. Trend analysis plainly showed a downmove in the overall retail sales performance indicator in 2016. Similarly, the trend for six out of the nine retail categories covered by the report pointed downwards in 2016.
The report’s rationale
About the present report 18. The fourth edition of the Retail Activity Indicators report bases its statistical analysis of indicator data on 48-month long
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The present edition confirms the report as the country’s foremost reference on retail trade.
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The exercise of building retail activity
indicators seeks to fill a gap in the national statistics platform, to provide retail enterprises and prospective investors with a quantitative gist of the retail industry, and to put at the disposal of representatives of the retail industry the quantitative basis to carry out their advocacy mandate.
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Foreword Global uncertainty ahead Regional confrontations persist Promising appointments Restoring fiscal policy, a necessary condition for recovery
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The fourth edition of the LFA-CCIABML Retail Activity Indicators report analyses the retail sales indicators of the second half of 2016 and reviews the year’s jaded retail industry performance. In that year, three persisting and heavy drags have confined consumption expenditure to a near-stagnation path. These are: static household disposable incomes, a large household debt overhang, and comparatively puny rates of growth in tourist inflows and spending. Political change may have improved consumer expectations in the last two months of the year, but if anything, expectations remain fickle, what with the enduring and justifiable skepticism about the prospects of better governance and the looming regional and global uncertainties.
Global uncertainty ahead Twenty seventeen starts as a year of global economic uncertainty, ominous but also promising, daunting yet potentially reassuring. It is a year that foreshadows fundamental changes in the
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world’s economic, financial, monetary, and trade conditions. Decision-makers in the world’s largest economy have signaled a resolute intent to adopt pro-business, pro-growth policies in areas of monetary management of the economy, taxation, infrastructure building, international trade, industrialization, energy, and the environment. Success in instigating these policies will not only lead to a sweeping departure from the past eight meager years of sluggish growth in the U.S., but will also have game-changing outcomes globally. To be sure, the expected fiscal stimulus in the U.S. got the seers scrambling to re-adjust their projections on global growth. Still, many causes for concern warrant an opposite review of expectations. Indeed, signs are emerging that divergence in policy views between the world’s economic
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powerhouses might skid uncontrollably into currency, trade, and investment confrontations. Developments in the European Union and China constitute weighty additions to global uncertainty. In Euroland, the worsening monetary and banking muddle and 2017 being an election year in three key EU countries are two factors that could trigger dynamics rendering the ‘European project’ more wobbly and divisive. The fault line that emerged from the animosity between a prospering creditor country and struggling debtor countries is set to raise tension by a few rungs in 2017. Whereas in China, and as the debt-fuelled decades-long growth draws to a close leaving in its wake grave financial concerns, Asia’s prime engine of global growth may be gearing to advance at a no-wake speed in 2017. But arguably, the most momentous change on the world scene is the near-demise of globalism
as an ideology, as suggested in the article reproduced in the “Opinion” section of the present report.
Regional confrontations persist On the regional scene, developments over the past three years have affirmed the geo-strategic reality that nation-states are no longer inviolable. In a record time, large swathes of inhabited lands have been turned into economic wasteland. If these events are prologue, then the outlook for the region is chilling indeed. When the dust clears, as it eventually will, the region would awaken to a radically different geopolitical ballgame. The rules of that game would mirror the victor’s design for the vectors and arteries of fossil fuel conduction.
Promising appointments In Lebanon, there are hardly any tangible grounds for optimism if the economy were to
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.. domestic political change holds the promise of a recovery, but just that. comport with economic performance in the region over the medium term. However, domestic political change holds the promise of a recovery, but just that. Limited as it may have been so far, political change has brought about the appointment of State ministers for human rights and for the eradication of corruption. This is certainly a laudable precedent-setting move, as the creation of the two ministerial positions and the gravitas lent to the appointments by the persona of the appointees, may be viewed as portending preparations to bring forth a much-needed departure from the country’s loathsome record on both counts.
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From an economic viewpoint, championing human rights should involve putting in place a tightly weaved social safety net and enrooting the principle of equal opportunities for all into the system of economic management. Deliverance from corruption is an even taller order. It calls first for an agreement on terminology. Is it really corruption in the narrow sense of the word that the country’s economy and society are buckling under? Or is it a more malicious malady that defines and perpetuates a system of misgovernment? Acknowledging that a klepocratic State structure is currently in
Acknowledging that a klepocratic State structure is currently in place leaves reformist policy-makers with the scary task of dismantling the established interests fastened to that structure in all branches and levels of government.
retail activity indicators | second half of 2016
place leaves reformist policy-makers with the scary task of dismantling the established interests fastened to that structure in all branches and levels of government. The policy objectives in that regard need to take the longer view in instigating the coding of a body of laws and regulations into a re-formed system of government. Such legislative code should set standards for practices, promote transparency, establish accountability and deterrence, and enforce restitution. Let hope spring eternal. Ideally, and over the shorter term, the two ministries might morph into policy shops and work out a clear mandate, bold and attainable objectives, and policy approaches that would, in due course, lead to the emergence of a competitive and equitable system of economic management.
Restoring fiscal policy, a necessary condition for recovery In public finance, the choice between reform and inaction boils down to a choice between triggering public capital accumulation and languishing in iniquitous and destructive rent seeking behavior. Balancing the State budget by slashing public expenditure down to par with the current level of public revenues is a feasible endeavor that requires dissolving the theft component of public expenditure. In the context of the destructive fiscal muddle and its calamitous economic impact, only a balanced budget constitutes a step in the right direction – and a modest one at that. in such context, demands for the ‘rationalization’ – rather than the slashing – of public expenditure are preposterous. At the policy-making level, sounder macroeconomics brought about by an apposite mix of fiscal and monetary policies are needed to erect
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the first-order four pillars that would prop the economy’s potential for growth. These are: (1) a balanced State budget; (2) higher capital investment; (3) higher consumption expenditure; and (4) a positive balance of payments. In the meantime, coffee cup readings predicting dreamland prosperity are gaining currency and media echo, whereas more reasoned, fact-based, analysis-guided, model-inspired expectations and counsel are seen as killjoys. Albert Nasr QuantAnalysts
In public finance, the choice between reform and inaction boils down to a choice between triggering public capital accumulation and languishing in iniquitous and destructive rent seeking behavior.
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Introduction The retail industry as a complex system Data patterns
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In countries where the national statistics platform is wanting, quants are perpetually enthralled by the aptitude of the statistics administration in a mega economy to publish accurate retail sales data with a delay of no more than a few days past the period covered by the data. Such seemingly compelling capabilities in fact reflect the confluence of an efficiently administered retail sales tax, seamless coordination among hundreds of state and federal statistics offices, and the work ethos of large numbers of experts in quantitative methods. Where national statistics are yet to evolve into facilitators of economic analysis, settling for the humble pie seems to be a sensible choice. In its fourth semi-annual report, the Retail Activity Indicators (RAI) endeavor has daunting grounds to cover if it were to attain the objectives set by its proponents. And these objectives are anything but humble.
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The building of reliable all-inclusive retail sales indicators, strictly by the index-building book, is a statistical undertaking that would be formidable even in the most advanced quantitative environments. This is so due to the vastness and systemic complexity of the retail industry. While the definition of retail may be straightforward in that the line demarcating retail transactions from non-retail transactions is evident, defining the retail industry as a dimension of the economy at large is considerably more intricate.
The retail industry as a complex system Beyond the data, the indices, the descriptive statistics and the analysis is the retail trade industry as a complex system within the economy at large. Certainly, the retail industry presents the five defining attributes of a complex system. These attributes are: (1) Diversity: the retail industry comprises a large number of diverse markets and agents; (2) Interconnectedness: the industry’s markets
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and agents are interconnected; (3) Interactivity: a patterned interaction exists markets and players; (4) Interdependence: in that activity is one segment of the system is affected by activity in many other segments and is in turn influenced by variables defined in other parts of the system; and (5) Adaptive behavior: agents adapt their policies, approaches, and actions in response to what they perceive to be policies or actions taken by competing agents. Such a complex system functions within a social, political and psychological context, and that, to a large measure, adds to the difficulty of fully identifying the scores of first-order variables that determine the evolution of the system’s overall performance. Assuming that the vast number of predictor variables – or a significant portion of them – are determined, and if consumption were to be expressed as the dependent variable in a regression equation that seeks to offer an acceptably accurate rendition of reality, then that equation
.. the retail industry presents the five defining attributes of a complex system. would have to be visualized as a descriptor of multi-dimensional hyperplane. An even taller order involves the requisite that time series are available for both the predictor variables and the dependent variable. Obviously, complex systems defy reductionist reasoning and are, more often than not, recalcitrant to forecasting. That the system is prone to wax and wane is probably the sole predictable reality.
Data patterns The report goes a long way in detecting structure in data sets, as structure presumably conduces to explicative narrative and prediction. In an environment where hyperboles abound, the report’s approach is to support serious analysis
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by working out descriptive statistics to the fullest meaningful extent.
and a fourth chapter to the statistical analysis of these indicators.
The analysis of retail sales indicators seeks to highlight both category-specific attributes of sales performance as well as detect trend-shaping patterns. Hence, the narrative woven around numbers is evidently dictated by those two aims.
The “Views From Within” section of the report includes an interview with economist and retail expert Dr. Nabil Fahed. The interview is titled “In Nine Answers” and sheds insightful light on nine critical retail industry concerns.
In this issue of the report
Also in that section, a brief concept note titled “Supporting retail activity calls for internal trade reform” defines the main areas for reforming and modernizing domestic trade.
As in previous editions, the report dedicates a chapter to describing the methodology adopted in index building, a second chapter to setting the economic backdrop against which the retail industry is evolving, a third chapter to the presentation of the indicators by sector and time period,
.. complex systems defy reductionist reasoning and are, more often than not, recalcitrant to forecasting. That the system is prone to wax and wane is probably the sole predictable reality.
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In the “Opinion” section, a bi-focal article titled “Elusive prosperity, receding prospects” interlaces an analysis of current issues relating to globalism and a review of the Lebanese economy’s predicament and prospects.
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Methodology Data sources The data processing protocol Comparison of sales indicators
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The fourth edition of the Retail Activity Indicators (RAI) report completes a four-year coverage of retail data and by the same token lengthens the time series to 48 data points, which imparts a heftier stabilization ballast to the index building procedure and to the resulting indicators. The report’s established position as an accurate and reliable gauge of the performance of retail sales is reinforced by continual fine-tuning of the scores of key index building formulae and the prompt adoption of advanced quantitative tools of analysis as they become workable and warranted by the longer time series. The RAI report aspires first and foremost to be relevant to retail businesses by meeting their needs in three core areas of concern. These are:
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1. Retailers need to benchmark their sales performance against that of market metrics. 2. Investors in the retail sector need to base their decisions and market strategies on accurate actual metrics as well as on reliable sales forecasts. 3. Retail enterprises need to construct a comprehensive data framework and integrate it within their planning model. To retail enterprises that value data-based decision-making and market analysis, the RAI report’s expanding data sets and processing techniques are set to constitute a both a keystone and a touchstone to such a framework.
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Data sources As in the previous editions of the RAI report, payment systems data and data from major shopping malls constituted the bulk of data from which retail sales indicators were processed. a. Transactions through card payments Data sets obtained from credit/debit card payments systems represent a substantial proportion of total retail transactions nationwide and are hence assigned the highest weight coefficient in the RAI report’s index-building protocol. Retail transactions carried out through card payments account for such a large proportion of total retail transactions and for such a broad geographical coverage that no conventional sampling procedure could possibly match. An added advantage of data from credit/debit card payment systems is that
they capture digital retail transactions. a. Sales data from shopping malls Data sets on retail transactions recorded by shopping malls add to the robustness of the retail sales indicators derived from these sets due to the fact that partner malls providing the data are the country’s largest in terms of geographical coverage, footfall, tenants, and transactions. b. The retail enterprise survey Responses obtained from the retail enterprise survey are viewed as helpful pointers reflecting the opinion of responding retail executives. The questionnaire was designed to achieve two objectives namely, (a) securing a precise assessment of the performance of retail businesses, and (b) detecting the extent to
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which retail executives are confident about the prospects of their activity’s performance.
The data processing protocol In a bid to preserve the integrity of the foundational time series, the fourth edition of the RAI report retained the data processing protocol developed in the preceding reports. The eight main steps of the statistical processing protocol followed in the fourth edition of the RAI: - retained the year 2012 as the base year, - weeded out categories that are either not relevant to retail, or the data for which were either incomplete or in the nature of outliers, - adjusted data for payment card market penetration, - applied the same set of weights as
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in previous reports to adjust data for size and market position of data suppliers, - applied the set of weights supplied by data providers to adjust data for relative size of retail categories in the recorded transactions, - re-calculated the seasonality indexes in order to obtain seasonally adjusted indicators for the 48-month data sets. - re-calculated trend equations for the 48-month data sets, - regressed the time series for each category and sub-category of retail against economic variables in order to detect correlations.
Comparison of sales indicators Retail enterprises commonly adopt the yearto-date comparison of sales indicators to assess change in sales performance. The RAI
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report reproduces in table form and in chart form year-to-date as well as month-to-month comparisons, as both have complementary advantages. The month-to-month change · provides a measure of short-lived, non-trend-setting seasonal surges and dips in indicators. This comparison affords straightforward percentage expression to the recurring “December effect” and “Summer rebound”. · provides a measure of the median change occurring in ‘normal’, non-seasonally-influenced months. · over longer time series, it remains a valid, non-synthesized measure of change, (non-synthesized as distinguished from metrics obtained from de-seasonalization). · is the internationally-prevalent
approach to analyzing retail sales indicators. Year-to-date comparisons do have the advantage of detecting seasonal influences, and the RAI report goes a step farther on that count by deseasonalizing indicators data for trend identification purposes. For time units longer than a month, the quarter-to-preceding-quarter comparisons and the half-year-to-preceding-half-year comparisons also help detect seasonality patterns. Additionally, these comparisons gain in relevance in instances (a) where indicators for a category or sub-category of retail do not reflect seasonal influences, or (b) where seasonal surges and dips are ironed out through averaging with other months of the quarter or half-year.
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The Economic Backdrop A positive jolt awaiting a sustained pull The regional scene Public finances Infrastructure building and rehabilitation Stimulating consumption and investment Impactful exogenous factors Other key variables
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A positive jolt awaiting a sustained pull Lebanon’s presidential election has imparted an optimistic spin on the prospects of the economy rejoining sturdier output growth. Undoubtedly, political developments have had a positive impact on expectations, but this alone is unlikely to have a lasting effect on economic undercurrents and fundamentals. It is not by elections alone that good economic and political governance are achieved, nor is the end of desolation economics brought about by good intentions alone. The country may have regained a semblance of political normality – a necessary precondition for economic recovery - but there is still many a slip between the cup and the lip. The positive impulse may have rekindled hope for a recovery, but more signs are needed to reassure consumers and investors that the paths to good governance, a saner fiscal policy, and a
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.. political developments have had a positive impact on expectations, but this alone is unlikely to have a lasting effect on economic undercurrents and fundamentals.
lasting economic impact are indeed practicable. The rush to quantify that impact at this juncture remains in the realm of speculation, what with imponderable intervening exogenous factors, be they positive or negative.
The regional scene Dystopian geo-political influences are still looming large on investment decisions, as the country’s economy remains severed from the regional economic expanse that is so vital to its endurance. On the threshold of its seventh year, the war in neighboring Syria is increasingly being perceived as a regional conflict that could degenerate into drawn-out confrontations.
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Dystopian geo-political influences are still looming large on investment decisions, as the country’s economy remains severed from the regional economic expanse that is so vital to its endurance. Investment decisions have been affected negatively by such perception and this has contributed to undermine growth prospects in Lebanon and in most economies of the region.
Public finances Steering public finances along a saner path involves eliminating deficit spending by purging the State budget from wasteful public spending and all forms of fraudulent misappropriation of public financial resources. The corruption-induced component of public expenditure is so large that its swift elimination
The corruption-induced component of public expenditure is so large that its swift elimination would reduce State spending to parity with the current level of public revenues. would reduce State spending to parity with the current level of public revenues. Recurrent business opinion surveys clearly point to the view that, within the current economic context, no public-policy decision would match in its effect the positive impact that a drastic reduction in wasteful public spending would have on business confidence. Balancing the State budget constitutes an intermediate policy objective within a comprehensive and financially complex approach to thwart the explosive growth of the public debt, pending recovery and the expansion of the tax base.
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.. the absolute worst options that could be taken involve allowing corruption to fester and, concurrently, increasing tax rates the incidence of which is grossly regressive and hence detrimental to growth and stability. In the current state of public finances, the absolute worst options that could be taken involve allowing corruption to fester and, concurrently, increasing tax rates the incidence of which is grossly regressive and hence detrimental to growth and stability. All signs are that these are the options presently being contemplated, whereas just the opposite fiscal measures are needed to spur growth. If tax rates were to be raised, the retail industry should brace itself for an extended period of stagnation, as the increased tax burden on households would exert strong downward pressure on spending.
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Infrastructure building and rehabilitation While notionally, expenditure on infrastructure building and rehabilitation lays the foundation for long-term economic growth, in the context of Lebanon’s current fiscal muddle such expenditure cannot be financed through additions to the public debt. To be sure, the mess in public finances is at a point on the curve where additional large-scale public borrowing – even for infrastructure building – would have a destabilizing impact on the financial and monetary system.
While notionally, expenditure on infrastructure building and rehabilitation lays the foundation for longterm economic growth, in the context of Lebanon’s current fiscal muddle such expenditure cannot be financed through additions to the public debt.
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The much-delayed body of laws and regulations on the public-private partnership for the financing of large infrastructure projects has evidently contributed to the protracted economic slowdown. Winning the battle against systemic corruption is the sine qua non for the success of the public-private approach to financing large public projects. Certainly, lessons from other countries provide a warning that such approach inevitably degenerates into abject failure in countries where corrupt governance prevails.
Stimulating consumption and investment A recovery-inducing tax plan needs to be drawn. Policy-makers simply cannot hope to induce growth just by ‘talking up’ investment, consumption, and growth through politicking and at no ‘cost’ or trade-off. A reduction in the Value Added Tax (VAT) rate and significant incentives to capital investment
Policy-makers simply cannot hope to induce growth just by ‘talking up’ investment, consumption, and growth through politicking and at no ‘cost’ or trade-off. should not be ruled out as policy options, and certainly not on the pretext that public revenues would diminish. On both the consumption and the investment counts, much remains to be done. Consumption expenditure, which constitutes no less than two thirds of Gross Domestic Product, is constrained by policy-influenced psychological and economic factors. Indeed, discontent and the vast disparity in income and wealth distribution are interlinked factors that account for the insecurity of the Lebanese, and hence for restrained household spending. In the latest international report on happiness, Lebanon ranked 93rd of a total of 157 countries for which the happiness index was constructed.
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As for investment expenditure, Lebanon’s dismal ranking on the ease of doing business acts as a strong headwind to fast-paced capital accumulation.
Impactful exogenous factors Four exogenously determined price categories namely, interest rates, the U.S. dollar’s exchange value, energy prices, and food prices, have a weighty impact on retail activity in Lebanon. Other equally important external factors that affect retail activity, such as the capital inflows and the inflow of tourists, could to a varying extent be influenced by domestic policies, measures, and developments. 1. Interest rates are set to remain near their lows despite the latest U.S. decision to raise the fed funds rate and the discount rate. In mid-December 2016, the U.S. Federal Reserve Bank’s Open Market Committee (FOMC) decided
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to raise the target range for the federal funds rate by a quarter percentage point to a range of 0.5 percent to 0.75 percent. By the same stroke, the discount rate was also raised by the same percentage to 1.25 percent. In explaining and justifying the move, the FOMC reiterated its positive interpretation of U.S. employment data and its expectation that the rate of inflation is bound to edge back toward the two-percent target rate it has set. While markets and central bankers had, in near-unanimity, anticipated this uptick in Fed funds rate, medium-term expectations remained firm as to the persistence of a monetary policy that is accommodative to banks’ need for low-interest Fed lending and liquidity. The recent Fed move on the funds rate and the discount rate came a full year after a similar decision that had raised rates also by a smidgen 25 basis points in December 2015. The second upward
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revision of the rate in nearly a decade set off the running joke that the rate was raised by naught point something from naught point something to naught point something. Indeed, to borrowing banks, rates remained practically unchanged from their all-time low level. Added to this is the cryptic assurance from the FOMC that future rate adjustments will be just as trifling as the past two. The stage was set for such a decision as buoyant expectations were fueled by the new Administration’s announced intention to instigate a sizeable fiscal stimulus as a means of moving the economy out of the low-growth period and into a long-winded expansion cycle. Equityand bond-market strength also facilitated the decision. In Fed talk, “economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate”, according to the FOMC official statement on the rate increase. This may be interpreted to mean that the Fed expects no
Implications of low-tostable rates of interest on the retail scene in Lebanon are momentous. major improvement in economic conditions and that whatever improvement may occur would call for no more than a minor rate tweak provided real rates of interest remain negative. An even stronger guidance to expectations was expressed in the equally oblique phrasing that “the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.” The equivocation in here lies in the fact that long-term rate expectations are referenced whereas Fed policy and statements are in effect the prime influencers of these expectations. Implications of low-to-stable rates of interest on the retail scene in Lebanon are momentous.
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Expectations of relatively constant rates of interest (a) have a direct bearing on the propensity of households to contract consumption credit; (b) stabilize the debt-service component within household budgets; (c) contribute to overall price stability by reducing business uncertainty regarding the cost of credit; (d) stabilize the cost of interest subsidies granted by monetary authorities to the enterprise sector, and (e) retain the inflow-inducing interest differential without unduly restraining growth. 2. The U.S dollar’s exchange value strengthened in relation to nearly all major currencies in November 2016 in the wake of the results of U.S. presidential elections, and staged a turn northwards in December 2016 following the Fed’s decision on interest rates. The outlook for the U.S. currency rate of exchange over the medium term obviously hinges on the new U.S. Administration’s successes in pushing forward a pro-growth, pro-business expansionary
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fiscal policy. However, the twin deficits should be expected to continue exerting a dampening effect on the U.S currency’s exchange value. The possibility of the new Administration adopting a weak-dollar policy is yet another attenuating influence on the dollar’s rate of exchange. To the extent that a large proportion of Lebanon’s imports are paid for with U.S. dollars, and given the dollar-Lebanese pound peg, a stronger dollar over the medium term contributes to the consolidation of domestic price stability. 3. Energy prices have picked up moderately – due to speculative rather than growth-induced demand – after the Organization of the Petroleum Exporting Countries (OPEC) agreed in November 2016 to cut production by 1.2 million barrels a day as from the first day of 2017. The oil producers’ cartel also sought to get nonOPEC producers to reduce production with a view to inducing a rise in prices.
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However, a comprehensive analysis of the metrics affecting oil prices sheds light on supply-side factors that would still apply a depressive impact on oil prices, even on the pious assumption that producers would adhere to their share of the production cut. These factors include oil producers’ inventory levels and drawdowns, export policies, the current state of U.S. energy production, and the new U.S. Administration’s energy policy. While a thorough supply-side analysis of these factors lies beyond the ambit of the present report, such analysis offers pointers that, over the shorter view, supply tightening will remain modest at best and oil prices will meet resistance at or near the upper bounds of $60-$65 to the barrel set in December 2016. Only a sustained demand-side pull will break these resistance levels and set a higher equilibrium trading range. In Lebanon, relatively lower energy prices over the past 30 months should have had a stronger
boosting impact on household spending as energy outlays take up a substantial portion of household budgets. 4. Food prices
According to the food price index built by the Food and Agriculture Organization (FAO), international food prices staged an upturn in 2016, but remained quite near the six-year low recorded in January of that year. On a yearly average basis, the 2016 index remained 2.07 percent lower than its previous year’s level. In the period 2013 to 2016, the index fell by a cumulative 24.7 percent.
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Other key variables 1. The Consumer Price Index
Twenty sixteen was the year when the Consumer Price Index (CPI) staged a clear upturn – albeit a relatively restrained one – that came after a two-year decline. As a matter of fact, by January 2016 when the CPI reached its lowest level for the period 2014-2016, the index had fallen by a cumulative 6.79 percent from its January 2014 level. In the eleven months to December 2016, the CPI rose by a cumulative 5.17 percent. In that eleven-month period, the index marked an uptick in each month bar one.
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In 2016 as a whole, the CPI rose by 3.14 percent. The “old rent” component of the CPI registered the broadest advance as it ended the year up 15.34 percent. The “clothing and footwear” component of the index rose by 10.37 percent, the second largest increase for the year. The price index for the “housing water, electricity, gas and other fuels” component of household budgets rose by 5.81 percent, in line with slightly higher international energy prices.
retail activity indicators | second half of 2016
2. Tourism Monthly data on the numbers of incoming tourists show a clear four-year-long uptrend with successively higher seasonal highs and higher seasonal lows. Thus, the July 2016 seasonal peak saw the number of incoming tourists reach a four-year record high of 232,708 that is 11.51 percent higher than the July 2015 seasonal peak and 44.34 percent higher that the July 2014 seasonal peak.
recorded in the year before, 24.63 percent more than 2014 tourist arrivals, and 32.49 percent more than 2013 arrivals. The monthly average tourist arrivals rose by 11.23
percent in 2016 compared with a rise of 12.05 percent in 2015 and 6.3 percent in 2014. Of total tourist arrivals over the past four years, the median share of tourists coming from Europe was 33.36 percent and that of Arab tourists was 31.61 percent. Tourist arrivals in 2016 totaled 1.69 million, that is 11.23 percent more than the number of arrivals
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3. Imports Reflecting stagnant aggregate demand, the value of imports rose by a modest 3.53 percent in 2016, but remained noticeably below levels reached in the years of high economic growth. The uptick broke a three-year stretch during which the value of imports declined by a cumulative 15.09 percent from their 2012 level.
Tourist-generated demand being one of the determinants of retail sales, a significant correlation was found between the inflow of tourists and the sales indicator for hospitality services, with a coefficient of determination of 0.57.
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retail activity indicators | second half of 2016
In 2016, the value of imports totaled $18.7 billion, down a cumulative 12.1 percent from their level in 2012.
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retail activity indicators | second half of 2016
The Indicators Monthly evolution of retail sales indicators in the second half of 2016 Quarterly evolution of retail sales indicators in the second half of 2016 Half-yearly evolution of retail sales indicators Yearly evolution of retail sales indicators
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III.A- Monthly evolution of retail sales indicators in the second half of 2016 A short-lived July surge Retail sales started the second half of 2016 on a strong footing. The retail sales indicators of nearly all categories of goods and services covered by the report staged a marked increase in July 2016 compared with their previous month’s level. The July 2016 rise in retail sales indicators mirrors the sales performance recorded in the months of July of 2015 and 2013. On a month-to-month basis, the overall indicator
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for the nine categories of consumer goods and services rose by 19.92 percent in July 2016. The overall indicator then moved down in each of the four months that followed. In that move, the indicator wiped out all the gains and then some and hit the year’s lowest level by November as it dipped 21.79 percent compared with the July peak. That indicator had drawn a fairly similar pattern in the year 2015 and 2013 as it had gained 18.45 percent in 2015 and 14.49 percent in 2013 and fallen in the subsequent four months.
retail activity indicators | second half of 2016
On a year-to-date basis, the overall sales indicator was down 5.1 percent and 7.73 percent respectively in July and August 2016 compared with the level it had reached in the same months of the previous year. That indicator was higher in the three months to November compared with the corresponding months of the previous year. The pattern outlined by the overall indicator was more or less closely replicated in the indicator data for six of the nine retail sales categories covered by the report namely, the clothing, food and beverages, luxury goods, sports and hobbies goods, hospitality services, and medical services. A noticeable number of sub-categories also followed the same pattern..
III.A.1 – Clothing and fashion
The overall retail sales indicator followed the December surge pattern recorded in previous years as it shot up by a steep 55.58 percent in December 2016 from its previous month’s level. However, the year-to-date comparison shows that index at a level 4.71 percent below that of December 2015.
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The retail sales indicator for clothing and fashion followed nearly the same pattern as that traced by the overall indicator, as it moved up on a monthto-month basis by 22.6 percent in July 2016, but retreated just as steeply in the four months that followed. By the end of November, that indicator was down by a broad 29.11 percent from its July level.
On the year-to-date count, the sales indicator for clothing was in negative territory for nine months of 2016, including the month of December when it was 5.56 percent lower than its December 2015 level. On a month-to-month basis, the sales performance indicator for clothing and fashion was 62.58 percent higher in December 2016 compared with its level in the preceding month. The clothing and fashion category includes the seven sub-categories of men’s wear; women’s wear; women’s accessories; children’s wear; shoes; apparel; and fabric and sewing.
III.A.2– Food and beverages The year-to-date change in the sales indicator for the clothing and fashion category also reflected a better performance in the month of July 2016. That indicator rose by 2.59 percent in July 2016 compared with its level in the corresponding month of 2015, its broadest year-to-date gain in 2016.
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retail activity indicators | second half of 2016
The July pattern was less pronounced in the food and beverages sales indicator, which rose by a comparatively moderate 7.14 percent in July 2016 then fell back by a combined 6.15 percent in the subsequent four-month period. On a year-to-date basis, that indicator was up in every single month of 2016 compared with the corresponding month of the previous year. This is clearly reflected in the chart tracing the indicator’s year-to-date change. Thus, in the second half of 2016, the broadest year-to-date gain registered for the food and beverages indicator was recorded in the month of August with a 21.53 percent increase compared with the same month of the year before.
In December 2016, the sales indicator for food and beverages was 11.4 percent higher than its December 2015 level. That was the best performance, on a year-to-date basis, among the nine retail categories examined in the report. Compared with its level in the preceding month, the sales indicator for food and beverages rose by a broad 65.03 percent in December 2016. The food and beverages category comprises the five sub-categories of supermarkets; confectionery; bakeries; various food stores; and alcoholic beverages.
III.A.3- Cosmetics
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The sales indicator for the cosmetics category of retail was up by 22.91 percent in July 2016, but that was not its biggest climb of the second half of 2016. As a matter of fact, that indicator fell back by 20.02 percent in following month, traced a sharp rebound of 28.92 percent in September only to fall back again by 31.48 percent in November. The month-to-month comparison showed that indicator 40.03 percent higher in December 2016. The broad swings are typical of the cosmetics sales indicator, which has steadily followed a comparatively different and more erratic pattern of fluctuations compared with other retail categories.
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The year-to-date indicator comparisons point to a differing narrative, where the month of September 2016 saw the index at a level 59.07 percent higher than that of the corresponding month of the year before, the year’s record high on that count. On a year-to-date comparison, the indicator for December 2016 was down 24.07 percent from its December 2015 level, the broadest decline registered among retail categories examined in the report.
The cosmetics category of retail includes three sub-categories namely, perfumes, cosmetics, and personal care products.
retail activity indicators | second half of 2016
III.A.4– Household goods
The sales indicator for household goods also deviated from the July surge pattern. On a monthto-month basis, that indicator moved up by a moderate 3.27 percent in July 2016. In November, the indicator rose by 12.65 percent then in December it registered its best performance of 2016 when it rose by 60.97 percent.
The year-to-date comparisons again deviate from the pattern set by the month-to-month comparisons. On a year-to-date basis, the indicator remained in the positive space in the first five months of 2016 and subsequently moved to the negative space for the subsequent six months. In December 2016, the indicator was 8.62 percent higher than its level in the corresponding month of the previous year. Items grouped under the household goods category of retail fall under the following eleven sub-categories: sanitary; glass, paint, and wallpaper; hardware; furniture; floor covering; drapery and upholstery; various home furnishing; household appliances; audio-visual; antiques restoration; and crystal and glassware.
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III.A.5– Luxury goods
The sales indicator for luxury goods restrainedly reflected the July surge pattern. That indicator rose by 8.1 percent in July 2016 and extended the rise, albeit at the lower rate of 6.89 percent in the month that followed. The subsequent two months saw that indicator fall by a combined 19.76 percent, followed by a rise of 8.05 in November. The December pattern was marked in the luxury items category. The sales indicator for that cat-
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egory of retail more than doubled in December 2016 as it rose by 113.67 percent from its previous month’s level.
The pattern drawn by the year-to-date comparisons is one of an indicator that was in negative terrain for eight months of 2016, and six of these months – including December – were in comparatively deeper negative layers as shown in the chart mapping the year-to-date change. The December sales indicator for that category was down 8.2 percent from its level in the corresponding month in 2015.
retail activity indicators | second half of 2016
Seven sub-categories are included in the luxury items category of consumer goods; these are: jewelry, watches, and silverware; crafts; art dealers galleries; florists; cigars; gifts; and electronics.
III.A.6– Sports and hobbies goods On a year-to-date basis, the indicator remained positive in each of the three months forming the third quarter of 2016 and negative in the two months that followed. In December, that indicator was 6.82 percent higher than its December 2015 level.
Sports and hobbies items saw their sales indicator rise by a significant 19.03 percent in July 2016. This was followed by a combined fall of 12.65 percent in the following two months, a rise of 8.24 percent in October, and a fall of 2.24 percent in November.
The sports and hobbies category represents three sub-categories of consumer goods: sporting goods; games and toys; and music instruments.
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III.A.7- Hospitality services The pattern of the July 2016 upswing and the broad decline in the succeeding four months was most pronounced in the sales indicator for hospitality services.
On a month-to-month basis, that indicator recorded the broadest increase in July in comparison with indicators for other retail categories. In that month, it surged by 78.24 percent from its previous month’s level. That indicator’s striking move, however, was reversed in the subsequent four months. By the end of November, that metric
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had fallen by 51.39 percent from its July level. In the month of December, the indicator staged a broad rise of 64.37 percent.
On a year-to-date basis, the July 2016 surge propelled that indicator to a level that was 10.35 percent higher than that of the same month of the previous year. The August indicator for that category of retail was 10.08 percent lower than its year-to-date level. Subsequent months saw that indicator move moderately higher in comparison with the same months of the year before.
retail activity indicators | second half of 2016
In December, the sales indicator for hospitality services fell 8.9 percent short of its December 2015 level. Hospitality related services include four sub-categories: catering; restaurants; pubs and nightclubs; and hotels and resorts.
month decline occurring in September when that indicator was down 13.35 percent. By the end of November, the indicator was 23.27 percent lower than its end June level. December witnessed a relatively moderate 13.84 percent improvement in that indicator.
III.A.8- Tourism services
The sales indicator for tourism services moved down in each of the five months from July to November 2016, with the largest month-to-
On a year-to-date basis, the sales indicator for tourism services in each of the three months from July to September 2016 was markedly lower than the corresponding months of the year before, whereas October and November were markedly higher than the same months of 2015.
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In December, the sales indicator for tourism services was 22.19 percent lower that its December 2015 level, the second broadest year-to-date decline among retail categories covered. The tourism category of retail includes six sub-categories; these are: travel agencies; travel services; movies and theaters; dance halls and studios; tourist attractions; and clubs.
III.A.9- Medical services The sales indicator for medical services traced the observed pattern of a July surge followed by subsiding move in the subsequent four months. In July 2016, the indicator was up 20.99 percent from its previous month’s level. In the ensuing four months, that indicator alternated rises and falls and in December it moved up 11.26 percent.
The year-to-date comparison has that indicator falling moderately in July and August 2016 from the levels of the same months of the previous
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retail activity indicators | second half of 2016
year. The subsequent three months saw the indicator for sales of medical services moderately higher than their year-before levels. In December, the indicator was 7.12 percent higher than its level in the same month of 2015. The medical services category includes five sub-categories. These are the services of: doctors; dentists; optometrists and ophthalmologists; hospitals; and other health and medical facilities.
III.B- Quarterly evolution of retail sales indicators in the second half of 2016 A quarter-to-quarter comparison shows a minimal decline in the fourth quarter retail sales indicator, which followed a marked rise in the indicator for the third quarter.
The overall quarterly sales indicator for the nine categories of consumer goods and services moved downwards by 0.86 percent in the fourth quarter of 2016. In that period, the sales indicators for five of the nine categories of retail were lower than their previous quarter’s level. In the third quarter of 2016, the overall indicator rose by 12.86 percent compared with its previous quarter’s level. In that quarter, eight of the nine categories of consumer goods and services recorded an advance. Only the indicator for retail sales of tourism services posted a moderate decline.
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Over the four-year period covered by the present exercise, the overall third-quarter indicator has consistently shown a more or less significant increase as compared with its second-quarter level. Thus, in 2015 the third quarter indicator was 14.62 percent higher than its previous quarter’s level, in 2014 it was 4.5 percent higher and in 2013 it was 9.62 percent higher. A year-to-date quarterly comparison, however, shows a minimal increase of 0.4 percent in the fourth-quarter overall indicator as compared with its level in the corresponding period of 2015. By that comparison, the third quarter overall sales indicator was down 2.31 percent.
III.B.1 – Clothing and fashion
On a quarter-to-quarter basis, the sales indicator for the clothing and fashion category of retail was down 2.54 percent in the fourth quarter of 2016. This decline came in the wake of significant increase of 11.91 percent posted in the third quarter of the year, the broadest quarter-to-quarter gain registered by that indicator in the four years covered by the present exercise. A year-to-date comparison saw the fourth-quarter clothing and fashion sales indicator 7.24
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retail activity indicators | second half of 2016
percent lower than its level in the corresponding period of 2015. That indicator was also down 0.41 percent in the third quarter of 2016 compared with the level it had reached in the corresponding quarter of the previous year.
In a year-to-date comparison, the sales indicator for food and beverages was up 9.98 percent in Q4-2016 and up 14.23 percent in Q3-2016 compared to the corresponding periods of the preceding year.
III.B.2– Food and beverages
III.B.3- Cosmetics The sales indicator for food and beverages rose by 14.73 percent in the fourth quarter of 2016 as compared to its level in the preceding quarter. And in Q3-2016 that indicator increased by 7.63 percent from its level in the preceding quarter.
The sales indicator for cosmetics declined noticeably in the fourth quarter of 2016 compared with its previous quarter’s level as it fell by 17.72 percent. That indicator posted a 9.66 percent rise in Q3-2016 from its Q2-2016 level.
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In a year-to-date comparison, the sale indicator for cosmetics was 17.72 percent lower in Q4-2016 than its Q4-2015 level. In Q3-2016 that indicator rose by 4.05 percent in as compared with its Q3-2015 level.
cent lower in Q3-2016 than its level in the corresponding quarters of the previous year.
III.B.5– Luxury goods
III.B.4– Household goods
On a quarter-to-quarter basis, the sales indicator for household goods rose by 13.75 percent and by 8.64 percent respectively in the fourth and third quarters of 2016. In a year-to-date comparison that indicator was 1.27 percent higher in Q4-2016, but 10.01 per-
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The sales indicator for luxury goods moved up by a marked 23.29 percent in Q4-2016 and by 10.67 percent in Q3-2016, as compared to the respective preceding quarters. The year-to-date comparison showed that indicator move down 3.05 percent and down 3.86 percent in Q4-2016 and Q3-2016 respectively.
retail activity indicators | second half of 2016
III.B.6– Sports and hobbies goods
same periods of the previous year. Thus, the indicator was 2.36 percent higher in Q4-2016 and 5.33
In the fourth quarter of 2016, the sales indicator for sports and hobbies goods recorded the broadest quarter-to-quarter advance as it was up 56.1 percent.
percent higher in Q3-2016 on a year-to-date basis.
The sales indicator for that category of retail was 10.09 percent higher in the third quarter of 2016 than its previous quarter’s level. That indicator also showed advances when its quarterly levels were compared with those of the
III.B.7- Hospitality services
The sales indicator for hospitality services surged by 50.71 percent in the third quarter of 2016 as compared to the previous quarter’s level, but fell back by 29.38 percent in the fourth quarter. On a year-to-date basis, that indicator rose by a minimal 0.53 percent in Q3-2016 and declined by
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a minimal 1.22 percent in Q4-2016 in comparison with the levels it was at in the same quarters of the year before.
compared with its Q4-2015 level. In Q3-2016 that indicator dropped by the broadest margin on a year-to-date basis, as it was diminished by 19.69 percent in comparison with its Q3-2015 level.
III.B.8- Tourism services
In a quarter-to-quarter comparison, the sales indicator for tourism services fell by 11.6 percent in the fourth quarter of 2016. In the preceding quarter, that indicator registered the only drop among the nine indicators as it declined by 7.13 percent. The sales indicator for this category of retail services edged up 1.44 percent in Q4-2016
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III.B.9- Medical services In Q3-2016, the sales indicator for medical services climbed 16.52 percent from its previous quarter’s level and moved down a trifling 0.11 percent in Q4-2016. On a year-to-date basis, however, the Q4-2106 sales indicator for that category of retail was up 10.76 per-
retail activity indicators | second half of 2016
cent on its Q4-2015 level. In Q3-2016 the indicator had retreated by 3.14 percent from its Q3-2015 level.
III.C- Half-yearly evolution of retail sales indicators In the second half-year of 2016, the sales indicators for eight of the nine categories of consumer goods and services included in the present report posted gains on both the period-to-preceding-period and the year-to-date comparisons. The sales indicator for tourism services was the sole decliner on both modes of comparison. Influenced by the December surge, the overall retail sales indicator is invariably higher in the second half-year as compared to the preceding half-year. The more expressive measure of momentum, therefore, involves a comparison of the extent to which the sales indicator rose in corresponding second-half-year periods of previous years and the extent to which first-half-year periods declined in previous years.
Judging by the second half-year 2016 indicator metrics alone, and within the report’s data sets, retail sales have generally fared better than previous corresponding periods. However, two major caveats remain: (a) H2-2016 is but one data point in this context and it is hence too early to detect a sustainable upturn, and (b) the yearly sales indicator metrics are still inconclusive as to the formation of an uptrend. The overall sales indicator for the exercise’s nine retail categories was up 15.02 percent in the sec-
59
ond half of 2016 as compared with the previous half-year period.
On a year-to-date basis, the sales indicator for that category of retail rose by 3.61 percent compared with its level in the second half year of 2015.
Compared with the corresponding half year of 2015, that indicator was 6.41 percent higher in the second half year of 2016.
III.C.1 – Clothing and fashion The sales indicator for clothing and fashion rose by 14.13 percent in the second half of 2016 compared with its level in the preceding half-year period. In the first half of the year, that indicator had fallen by 9.22 percent.
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III.C.2– Food and beverages
The sales indicator for food and beverages for the second half of 2016 moved up 16.35 percent from its level in the previous half-year period. In a year-to-date comparison, that food and beverages sales indicator was 22.78 percent higher in the second half of 2016 compared with its level in the corresponding period of the preceding year.
retail activity indicators | second half of 2016
III.C.3- Cosmetics
III.C.4– Household goods The retail sales indicator for cosmetics rose by 22.28 percent in the second half of 2016 in comparison to its level in the preceding half-year. That indicator had fallen by 15.16 percent in the first half of the year. The sales indicator for cosmetics rose by 3.75 percent in H2-2016 compared with its H2-2015 level.
On a period-to-previous-period count, the retail sales indicator for household goods rose by 21.46 percent in the second half of 2016 following a 16.32 percent fall in the first half of the year. The year-to-date change in that indicator was less ample it moved 1.64 percent higher in H2-2016 from its H2-2015 level.
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III.C.5– Luxury goods
III.C.6– Sports and hobbies goods
The sales indicator for luxury goods increased markedly in the second half of 2016 compared with its level in the preceding half year; it rose by 25.23 percent following a decline of 8.3 percent in the first half of the year.
The sports and hobbies sales indicator recorded the broadest advance in the second half of 2016 on both modes of comparison. Compared with its level in the previous half-year period, that indicator was 31.4 percent higher in H2-2016; and it was 30.1 percent higher than its level in H2-2015.
The sales indicator for that retail category was 14.84 percent higher in H2-2016 than its H2-2015 level.
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retail activity indicators | second half of 2016
III.C.7- Hospitality services
III.C.8- Tourism services
The sales indicator for hospitality services advanced by 26.51 percent in the second half of 2016 compared with its previous half-year’s level, the second broadest advance in that period. However, that advance came after a decline of 18.25 percent in the first half of the year, the broadest decline in that period.
The second half-year retail sales indicator for tourism services recorded the sole decline in that period as it slid 11.05 percent from its level in the preceding half year and was 8.32 percent below its level in the second half of the previous year.
On a year-to-date count, the sales indicator for that category of retail services was up 3.42 percent in H2-2016 compared with its H2-2015 level.
III.C.9- Medical services The retail sales indicator for medical services was 10.02 percent higher in the second half of 2016 compared to its level in the first half of the year.
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This advance followed a decline of 5.77 percent in the H1-2016 indicator.
carried the overall yearly sales indicator into negative – albeit shallow – layer.
Compared with its H2-2015 level, the H2-2016 sales indicator for that category of retail was 3.67 percent higher.
The overall retail sales indicator for the nine categories of goods and services was down 0.75 percent in 2016. The overall retail sales indicator for 2016 remained 10.23 percent below its base year level. Of the nine categories of consumer goods and services included in the report, six saw their sales indicators decline in 2016.
III.D- Yearly evolution of retail sales indicators The second half of 2016 may have given faint signs of improved retail sales performance, but the dismal numbers of the first half of the year
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retail activity indicators | second half of 2016
III.D.1- Clothing and fashion
III.D.3- Cosmetics
The sales indicator for the clothing and fashion category of retail declined by 5.62 percent in 2016 and remained 32.52 percent below its 2012 base level. As shown in the chart tracing the yearly evolution of that indicator, the metric was down for four years in a row, with a sharp decline in 2013 followed by steadier rates of decline thereafter. The sales indicator for cosmetics was down by 1.88 percent in 2016 following a broad rise in 2015 and a moderate one in 2014. In 2016, that indicator was 10.32 percent higher than its 2012 base level.
III.D.2– Food and beverages The sales indicator for food and beverages reflects a sharp three-year long rebound following an even sharper fall in 2013. That indicator rose by 14 percent in 2016, but remained 5.28 percent below its 2012 base year level.
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III.D.4– Household goods
III.D.6– Sports and hobbies goods
The sales indicator for household goods was 1.5 percent lower in 2016. In four consecutive yearly declines, that indicator fell to 34.98 percent below its base year level, the second broadest negative gap among the nine retail indicators of the report. Tracing a broadly comparable path to that of the sales indicator for luxury goods, the sales indicator for sports and hobbies goods remained near the lows reached after the steep fall of 2013. In 2016, that indicator rose by 4.12 percent, but remained 36.11 percent below the base year level.
III.D.5– Luxury goods The sales indicator for luxury goods was 6.11 percent lower in 2016 and remained at 40.08 percent below the 2012 base year level, the broadest negative gap from base. As the chart reveals, that indicator failed to recover from the steep fall in 2013.
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retail activity indicators | second half of 2016
III.D.7- Hospitality services
III.D.9- Medical services
The retail sales indicator for hospitality services retreated by 3.8 percent in 2016 and remained 0.49 percent short of the 2012 base year level.
III.D.8- Tourism services
The retail sales indicator for tourism services deviates from the pattern traced by other sales indicators computed for the report. That indicator fell 8.73 percent in 2016, the broadest decline for the year. The plunge follows three consecutive yearly advances. For four consecutive years, the sales indicator for tourism services remained above the 2012 base year level; in 2016, that indicator was seven percent higher than the base.
The sales indicator for medical services also presented a distinct evolution pattern as it rose at a near-steady rate and stood at a level 40.04 percent higher that the base year level. In 2016, that indicator rose by 3.65 percent.
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Quarter-to-quarter change of retail sales indicators by category Q1-2016
Q2-2016
Q3-2016
Q4-2016
Clothing
-20.39%
6.83%
11.91%
-2.54%
Food & beverages
-12.15%
1.39%
7.63%
14.73%
Cosmetics
-38.65%
57.55%
9.66%
-17.72%
Household goods
-25.27%
9.66%
8.64%
13.75%
Luxury items
-30.84%
2.74%
10.67%
23.29%
Sports & hobbies
-31.75%
-12.73%
10.09%
56.10%
Hospitality
-4.18%
-3.14%
50.71%
-29.38%
Tourism
19.48%
3.42%
-7.13%
-11.60%
Medical services
6.29%
-10.47%
16.52%
-0.11%
-14.40%
4.82%
12.86%
-0.86%
All nine categories
Year-to-date quarterly change of retail sales indicators by category Q1-2016
Q2-2016
Q3-2016
Q4-2016
Clothing
-7.08%
-7.91%
-0.41%
-7.24%
Food & beverages
20.89%
12.51%
14.23%
9.98%
Cosmetics
-13.01%
12.98%
4.05%
-12.79%
5.37%
-0.54%
-10.01%
1.27%
Household goods
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Luxury items
-4.31%
-13.64%
-3.86%
-3.05%
Sports & hobbies
12.43%
-2.49%
5.33%
2.36%
Hospitality
2.08%
-16.52%
0.53%
-1.22%
Tourism
-20.38%
12.10%
-19.69%
1.44%
Medical services
16.19%
-6.94%
-3.14%
10.76%
All nine categories
-0.17%
-0.78%
-2.31%
0.40%
retail activity indicators | second half of 2016
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retail activity indicators | second half of 2016
The Analysis Seasonally adjusted retail sales indicators: the rationale Seasonally-adjusted retail sales indicators: the data Trend analysis The moving average approach
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VI.A. Seasonally adjusted retail sales indicators: the rationale The de-seasonalization of retail sales indicators, which adds another statistical processing stage to index building, constitutes the basis for trend detection and analysis. In their elementary form, retail sales indicators necessarily embody irregular, short-lived, nontrend-forming peaks and troughs of various magnitudes as well as seasonally-determined patterns. While the erratic fluctuations may be attributed to the numerous factors that influence the retail industry as a complex system, the seasonal patterns of activity are more predictable. However, both the seasonal influences and the more fickle fluctuations contribute to blurring the underlying, more stable evolution of indicator data. When applied to elementary indicator metrics, the seasonal adjustement process eliminates
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these blurring factors and lays bare the stabler vector underlying the period-to-period evolution of the indicator data namely, the trend. Detecting the trend that underlies data fluctuation has momentous implications on business decision-making as well as statistical analysis. At the retail enterprise level, the time series of de-seasonalized sales indicators offer retailers an invaluable benchmarking reference. Equally crucial to data analysis is the fact that seasonally-adjusted time series of retail indicators are more accurate descriptors of trend-formative fluctuations, and the derived trend constitutes a more solid foundation for acceptable forecasts.
retail activity indicators | second half of 2016
Seasonally-adjusted retail sales indicators: the data
IV. A. 1- The overall sales indicator
IV. A. 2- Clothing and fashion By ironing out moves detemined by seasonal factors and other varying influences, the de-seasonalization of the 48-month-long time series of the overall sales indicator reveals a pattern that is mostly dissimilar from that traced by the basic, non-seasonally-adjusted data. Months of peak and trough sales performance are more often than not at variance in the two data sets, and plainly the adjusted data reflect the fact that the trend for the overall sales indicator remained near-flat in the 18 months to end December 2016.
The seasonally-adjusted sales indicator data for the clothing and fashion sector of retail shows an unremitting downward move over the 48-month period analyzed in the exercise. In the monthly indicator data, the recurring twin annual surges in July and December help conceal the negative trend that formed throughout four years of continuous decline. Pointing to a comparatively strong seasonality influence in the basic indicator data, the de-seasonalized series exhibited a 57.12 percent nar-
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rower range of fluctuations and a 53.14 percent lower standard deviation compared with the corresponding metrics for the basic data.
For the seasonally-adjusted indicator data, the fluctuations margin was 46.37 percent narrower and the standard deviation was 38.5 percent lower than the corresponding metrics for the basic data.
IV. A. 3- Food and beverages The seasonally-adjusted sales indicator for food and beverages ironed out the recurring December surges, but otherwise closely tracked the upward move of the basic, non-adjusted sales indicator. This is a reflection of the fact that over the three-year period 2014-2016, the sales indicator for that category of retail moved up at a steady pace, bar the December surges.
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IV. A. 4- Cosmetics The seasonally-adjusted sales indicator for cosmetics closely replicated the ample and patternless fluctuations and the sideways movement traced by the basic indicator data. This normally occurs when the basic series show no recurring seasonal pattern, a feature that accounts for the fact that the de-seasonalization of the data only
retail activity indicators | second half of 2016
minimally reduced the range of fluctuations and the series’ standard deviation. As a matter of fact, the seasonal adjustment process reduced the range of fluctuations in that series by a comparatively modest 18.64 percent and reduced the standard deviation by 32.74 percent.
IV. A. 5- Household goods
The December surges constitute the weightiest seasonal influence within the household goods sales indicator series. These surges failed to stem the underlying downtrend of the 2014-2016 three-year period.
The weight of the December surges within the time series is reflected in the extent to which the range of fluctuations of the de-seasonalized indicator data is narrower than that of basic data. On that count, the seasonally-adjusted indicator data had a 67.56 percent narrower range of fluctuations and a 61.65 percent lower standard deviation than the basic data.
IV. A. 6- Luxury items Following roughly the same pattern of seasonality, the seasonally-adjusted sales indicator for luxury goods ironed out the December surges
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and tracked more or less tightly the fluctuations traced in the remainder 44 months of the period covered by the exercise. Again, the influence of the December peaks is expressed in the extent to which seasonal adjustment reduces the range of fluctuations. By that measure, the seasonally-adjusted indicator data fluctuated within a range that was 77.72 percent narrower than that of basic data and the adjustment process reduced the standard deviation by 75.99 percent.
IV. A. 7- Sports and hobbies goods Similarly, the time series for the sales indicator of sports and hobbies goods presented a pattern that resembled closely the series for luxury goods and those for household goods. Thus, when a strong seasonal influence exerted by the December surges is de-seasonalized, the adjusted indicator series’ scope of fluctuations was 74.01 percent lower than that of the basic data and the adjusted series’ standard deviation was 75.21 percent lower.
IV. A. 8– Hospitality services
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retail activity indicators | second half of 2016
The sales indicator for hospitality services presents a distinct and recurring July upswell, albeit more subdued than the December surges that characterize indicator data of other retail categories. Consequently, the comparatively weaker seasonal influence is reflected in the fact that data de-seasonalization leads to a comparatively more limited reduction in fluctuation range and standard deviation. Accordingly, the fluctuation margin of seasonally-adjusted indicator data is 51.56 percent narrower than that of basic data and the standard deviation is 56.25 percent lower.
IV. A. 9– Tourism services The tourism services sales indicator series, which exhibit fairly weak seasonal influences, are thus moderately affected by seasonal adjustement. Still, the downtrend of the 20 months to end 2016 was made more distinct by the de-seasonalization of indicator data. Reflecting the weak seasonal factors, the breadth of fluctutations of the adjusted indicator data was 26.36 percent narower than that of basic data and the standard deviation was 30.06 percent lower.
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IV. A. 10– Medical services Likewise, the medical services sales indicator series present no signs of strong seasonal influences at play. The de-seasonalized series show a steady-paced uptrend and a limited reduction in fluctuation range (-22.48 percent) and standard deviation (-24.98 percent) compared to the basic indicator series.
IV. B. Trend analysis For longer time series, the locally weighted fit constitutes a superior, more precise and detailed rendition of the trend than the linear alternative. Three characteristics account for the advantages of adopting the locally weighted fit to express the trend: a. this non-linear expression of the trend offers precious statistical information as it captures the major inflection points in the time series as well as outright changes in vector direction; b. the longer the time series the more im-
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probable they will meaningfully ‘fit’ into – or be represented by – a stylized, linear approximation. (Think of the inadequacy of having a flat trend-line representing a long-haul V-shaped curve.) c. in longer time series, changes in vector direction, which are captured on by the locally weighted fit, delimit the phases of data evolution and thus open the path to phase analysis.
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The overall retail sales indicator The seasonally-adjusted sales indicator for all nine categories of goods and services traces a mildly positive linear trendline with a gradient of +.2 The more advanced expression of the trend reveals a more nuanced, three-phased evolution of the indicator. The locally weighted fit thus shows a mild decline of the indicator in 2013 followed by a phase of moderate upturn that ended in mid2015, then a third phase of mild decline again. Applying the advanced statistical tool made it possible to reach the correct conclusion that the overall sales indicator has indeed failed to maintain a positive trend.
IV. B. 1- Retail sales indicators showing a negative trend
The seasonally-adjusted sales indicators for the clothing and fashion and for the household goods categories of retail traced a clear negative trend throughout the data series.
Clothing and fashion Retail sales indicator data for clothing and fashion drew a steady downward sloping trend throughout the four-year period covered by the report. The linear trendline is moderately inclined at a gradient of -.35
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The locally weighted fit similarly shows a steadily declining trendline with no inflection points.
IV. B. 2- Retail sales indicators showing a flat or near-flat trend Four retail categories exhibited a flat or near-flat overall trend. The non-linear, locally weighted fit showed that the four categories shared the common feature of having failed to maintain the positive momentum observed prior to 2016. Hence, indicator data for all four categories presented a negative trend in the 2016 portion.
Household goods With a gradient of -.21, the linear trendline for household goods indicator data is mildly negative. The locally weighted fit reveals a phase where the trendline’s slope was positive. This was followed by sharp downturn in 2014 and a gentler slide thereafter.
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Cosmetics
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The linear trend for the cosmetics sales indicator data shows a positive slope of +.41 , which should have customarily placed this category of retail among those that exhibited a positive trend throughout the four-year period under review. However, the locally weighted fit again conveys a usefully nuanced picture of a phase of mild downward sloping trend in 2013 followed by a two-year long mildly ascending slope, then another trend reversal in 2016.
The linear trend describing the sales indicator data for luxury goods is practically flat with a slope of +.05
Luxury goods
Hospitality services
The locally weighted fit once again offers a more thorough, three-phased description of the indicator data, thus providing an even clearer example of the limitations of the linearity notion in trend analysis.
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With a slope of +.12 , the linear trend related to the indicator data for hospitality services misses the three-phased trend evolution that the locally weighted fit conveys. In effect, the non-linear trendline shows a downward sloping portion followed by a rebound then a sideways 18-monthlong move till end 2016.
V. B. 3- Retail sales indicators showing a positive trend The sales indicator data for three categories of retail followed a distinctly positive trend in the four-year period of the data sets.
Food and beverages
Tourism services
The linear trend for the tourism services indicator data near flat with a slope of +.17 The non-linear trend for this category, however, reveals a two-year nearly steady upward move followed by a two-year slide.
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The linear trend for food and beverages sales indicator data showed a strong ascent with a slope of +.74 , the steepest among the nine categories of consumer goods and services examined in the report.
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The locally weighted fit nuanced the picture by showing a mild downward move in 2013 followed by a steady and comparatively steep rise thereafter.
Medical services
Sports and hobbies goods
With a slope of +.57 , the linear trend for medical services sales indicator data presented the second steepest ascending trend among the exercise’s nine categories of goods and services. The sales indicator data for sports and hobbies traced a linear trend with a slope of +.3 The data’s non-linear trend shows a slide in 2013 followed by a sturdy ascent in the subsequent two years and a milder ascent in 2016.
No portion of the non-linear trendline for that category showed a descent, a unique feature among the report’s nine retail categories.
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IV. C. The moving average approach The moving average completes the trend analysis in that it constitutes an accurate descriptor of change in time series. Evidently, the moving average line replicates the trendline and, like the seasonally adjusted data line, its smoothes out fluctuations.
The moving average approach applied to the overall retail sales indicator roughly replicated the non-linear trendline expressed by the locally weighted fit. However, the latter proved more sensitive to the trend’s inflection points.
As time series lengthen, the moving average metrics gain in relevance and usability.
IV. C. 1- Clothing and fashion Applied to sales indicator data for the clothing and fashion category of retail, the moving average mirrored the steady, no-correction downtrend expressed by both the linear and non-linear trendlines derived for the seasonally adjusted data for this category.
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IV. C. 2- Food and beverages
IV. C. 3- Cosmetics
Similarly, the steady ascent of the sales indicator for the food and beverages category was just as clearly reflected in the moving average metrics as it was in the linear and non-linear expressions of the indicator data.
The moving average metrics narrowed down the broad and patternless fluctuations of the sales indicator data for cosmetics and reflected the nearly-flat trendline expressed by the linear trend.
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IV. C. 4- Household goods
IV. C. 5- Luxury items
The moving average curve traced a similar pattern as that of the locally weighted fit derived from seasonally adjusted data for that indicator.
Due to the marked seasonality reflected in the retail sales indicator the luxury goods, the moving average approach hardly matched the locally weighted fit’s presentation of the trend’s change of directions.
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IV. C. 6- Sports and hobbies goods
IV. C. 7– Hospitality services
The sharp seasonal peaks have rendered less expressive the moving average curve for the sports and hobbies goods sales indicator data as compared with the locally weighted fit, which captured more clearly both direction and inflection points.
The moving average curve derived from the basic retail sales indicator data for hospitality services replicates the curve traced by the non-linear trend for the seasonally adjusted indicator data.
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IV. C. 8– Tourism services
IV. C. 9– Medical services
The moving average for the tourism services sales indicator clearly showed the reversal from a two-year uptrend to a two-year downtrend, and thus closely replicated the non-linear trend curve.
The moving average approach applied to the sales indicators for medical services illustrates the same general configuration as that revealed by the non-linear trend. The short-lived dip in the second quarter of 2016 is expressed in the moving average but not in the trendline.
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Concluding Notes The business sector’s wanting capacity and advocacy approach
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Judging by the minimal 0.75 percent decline in the overall retail sales indicator and the evolution of retail category indicators throughout the year, 2016 witnessed a middling performance of the retail industry. It was neither the best of years – as the trend for more sectors remained negative and the December effect lacked much of its yesteryear luster – nor was its the worst of years – as the second half of it saw eight of the nine retail sales indicators move up on account of a better than average July performance. In that sense, 2016 may be viewed as a pivot year where forces balance ahead of a firmer directional move. When negative and positives influences balance, a nudge could tip the scales in one direction or the other. Pushing towards the positive side, consumer expectations have certainly improved with the apparent return to normality on the political scene, which ignited prospects for the formu-
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lation of a reasoned economic policy and the abolition of kleptocratic power structures within the State and the public administration. Brighter expectations, however, will prove to be fickle if core economic ills are not addressed. By the end of four years of recession, retail activity is still depressed by a high and rising rate of unemployment and the job insecurity it engenders, stagnant to diminishing household disposable incomes, the pressure of high interest rates on household debt, the pressure of high taxation on household budgets, the ever-looming threat of further burdening households with even higher tax rates, and an upward move of the consumer price index after two years of decline. The common thread to these six predicaments is that they create a sense of financial precariousness that is so detrimental to household spending.
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The business sector’s wanting capacity and advocacy approach Addressing the six key depressants of consumption expenditure requires an effective business-oriented input to economic policy design, which in turn entails the ability to formulate a macroeconomic vision of a pro-growth policy with distributional effects; a tall order indeed, given the dearth of competencies and institutional capacity. The Retail Activity Indicators project is the Retail Observatory’s bid to build a knowledge base dedicated to supporting retail enterprises. And while that project constitutes a prerequisite to research work centering on retail, its scope and purpose can hardly be stretched to include the much-needed macroeconomic vision and the economic impact analyses.
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Views from Within In Nine Answers Supporting retail activity calls for internal trade reform
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The level of the retail activity is still below expectations and admittedly falls short of the aspirations of investors and operators in the sector. This has resulted in a marked slowdown in actual realized investments in 2015-2016. We hope that projects that were deferred or rescheduled will be executed in 2017. 2. Economic recovery
Economist Dr. Nabil Fahed of Fahed Group Holding, importers of a broad range of retail products and operators of SuperValue retail outlets, sheds insightful light on the economy and the retail industry. 1. The retail industry, past and prospects The retail industry witnessed an upswing in 2016. It is our expectation that 2015 set a trough in retail activity and that this positive turn will continue into 2017. This is because consumers are now feeling more secure and will therefore tend to hoard less than they had in the past couple of years.
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The economy has definitely embarked on a recovery path, underpinned by political and security achievements. A sustained recovery, however, is conditional upon instigating far-reaching political reforms; fighting corruption lies at the core of such reforms. Additionally, large infrastructural projects need to be implemented and public services need to be improved in the power, telecommunications and transport sectors. 3.  Needed laws and regulations Recovery would also be placed on a firm footing with the enactment of the private public
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partnership law and its associated regulatory provisions as well as the ratification of a State budget law that does not add new taxes to the tax burden on the private economy and that includes incentive programs for new investments and expansion outlays in private businesses. 4. The supermarket sector The supermarket sector has been quite vibrant and active and I see continuous investment in that activity, as sector-specific risk levels are not excessive. As a matter of fact, the sector’s risk factor is highly correlated with overall economic conditions. I expect few new entrants into the sector with further consolidation of existing players, albeit at a relatively slow, non-aggressive pace. 5. For a new internal trade law There is a definite need to enact a new internal trade law, which should take technological advances into consideration, especially in e-com-
merce as well as include new clauses to facilitate mergers, acquisitions and bankruptcies. 6. Consumer credit In absolute terms, the cost of consumer credit is in line with that prevailing in developed countries. In my opinion, what has slowed the expansion of consumer credit is the Central Bank of Lebanon’s safeguard directive limiting access to consumer finance by setting a ceiling to individual household retail borrowing. 7. Purchasing power Purchasing power in Lebanon is weak and the propensity to spend is high. This is coupled with a strong need to live at a higher standard of living than is warranted by the overall low level of income as evidenced by the low median income. 8. The retail industry and technology The retail industry in Lebanon is at the forefront of technology in all its facets, whether it is in supply chain, payments, management tools, and
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the like. However, prevailing laws are slowing the expansion of e-commerce and automation. In particular, the delay in implementing the law on electronic signature and the high cost and low speed of Internet connection services are holding back the retail industry’s investments and adoption of new advanced technology. 9. Food waste There is very little food waste at the level of stores and supermarkets, as these retail enterprises are driven primarily by the need to reduce costs and maximize profits. Still, several initiatives have been adopted to dispense products to food banks and to recycle food.
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Supporting retail activity calls for internal trade reform A concept note
I. The need to reform internal trade in Lebanon Internal trade in Lebanon is currently regulated by the Code of Commerce, an antiquated body of laws that failed to keep up with the modernization pressures building up in an activity that accounts for a hefty portion of the country’s Gross Domestic Product. This has caused the emergence of inefficiencies that are exacerbated by traders having to: - accept and/or deal with unsound payments and debt instruments, - consent to, and/or adopt inconsistent supply/purchase credit practices, - assume unwarranted risks, - suffer lengthy judicial proceedings that often end in mitigated rulings, and
hence losses to claimants. These shortcomings affect the two major aspects of domestic trade namely, the business-to-business and the business-to-consumer aspects.
II. Current conditions and their bearing on market structure and efficiency 1- Due to judicial laxity, commercial drafts, which should act as prime debt instruments in a well-regulated trading environment, can no longer fulfill that function in the context of Lebanon’s domestic trade. Consequently, three systemic weaknesses are currently hindering the growth of trade credit: a- Conditions for securing supplier credit in that sector of activity are far from being standardized, as they are dictated by the financial and/or market positions of the wholesale-retailer, supplier-distributor tandems.
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b- Creditor enterprises are, more often then not, deprived from resorting to the banking system when cash-strapped, as they hold no ‘discountable’ commercial paper. This forces them to either curtail activity or opt for high-interest ordinary bank credit, hence the emergence of costly inefficiencies. c- Higher cost of consumer credit as an inordinately large and fast growing portion of sales credit is done through banks, mainly because trading enterprises are neither able nor willing to bear the risk attached to such sales. d- With suppliers of non-bank trade credit increasingly shunning commercial drafts as acceptable debt instruments, the use post-dated checks gained ground. 2- In the absence of laws and regulations governing commercial non-bank credit, both the existing
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system and the prevailing practices favor enterprises with substantial financial means, hence hampering competitiveness and leading to the formation of oligopolies in almost of sub-sector of domestic trade. As a matter of fact, the absence of an enforceable statutory regimen for non-bank credit extension and repayment, inevitably establishes a system where facilities favor those enterprises that are dominant in their sector of activity. 3- Unlike banks, providers of trade credit have to bear inordinately high credit risks on their transactions with other businesses as well as on their consumer sales because they have no access to information on the credit worthiness and standing of their clients. All alternative remedies to this situation should involve the securing trade creditors’ access to information relevant to corporate as well as individual debtors. Such information could be managed within a structure akin to the central bank’s “Centrale des risques” which would be
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subjected to the supervision of the Ministry of Economy and Trade or the Ministry of Finance. Alternatively, credit information could be entrusted to a company or a group of companies that would structure and supply this information under rigorous official supervision.
III. Aim and approach The reform’s aim is to modernize the Code of Commerce with a view to introducing statutory credit sales procedures and debt instruments, and defining special judicial recourse for the collection of trade debts.
giving rise to costly inefficiencies in internal trade. The sources and causes of these inefficiencies should constitute the focal issues in this research study: risks attached to business-to-business and business-to-consumer credit due to the quasi-absence of credit information, - risk-based pricing and its impact on competition and consumer prices, - the absence of a ‘bankable’ trade debt instrument, - unregulated and inconsistent trade credit practices,
This requires action in four areas namely, diagnostic, legal, technical, and administrative.
- articles in the Code of Commerce that need to be revised as a precondition for the modernization of the trade sector.
1- Analysis and diagnosis An investigative and analytical research study needs to be conducted in collaboration with all stakeholders. The research study should be designed to reveal the constraints that are currently
- identify inherently risky and/or distortive trade and credit practices that need to obviated by the modernization of the trade sector’s legal, regulatory and financial framework.
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2- Legislation a- the drafting of all new articles and amendments to existing articles that should constitute the more current Code of Commerce in collaboration with all stakeholders. b- the drafting of new laws to regulate and encourage the establishment of financial companies that facilitate trade credit, such as factoring companies, trade credit insurance companies and the like. c- the drafting of amendments to company laws with a view to requiring companies to publish complete financial statements on a quarterly basis, and this in order to facilitate the assessment of a companies credit standing and creditworthiness. d- action and reform needed within the judiciary to speed up the proceedings of commercial tribunals.
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3- Technical aspects These involve the creation of a comprehensive trade credit information system. Options that ought to be thoroughly examined and considered include: - establishing a joint public-private association with a mandate to develop and manage a central trade credit information database, or - encouraging private enterprises to provide professional trade credit information services, preferably by entering into partnerships with renown international companies in that field. 4- Administrative setup This calls for proposing alternative designs for an official or a mixed public-private commission that would assume supervisory and regulatory authority over all aspects of internal trade. Such commission could be presided by a minister and should include representatives of various stakeholders in the public and private sectors.
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Opinion
ELUSIVE PROSPERITY, RECEDING PROSPECTS Musings on globalism and the economy’s defunct paradigm Capitalism, past and present Democracy and social policy Globalism: Ideology or historical process The national sovereignty backlash: the emergence of post-globalist capitalism A template for reforms
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ELUSIVE PROSPERITY, RECEDING PROSPECTS Musings on globalism and the economy’s defunct paradigm Albert Nasr The plethora of literature on current international economic and financial affairs directs thoughts to five basic conceptual constructs namely, capitalism; democracy; welfare; globalism; and the nation-state. When the five terms-cum-constructs are connected, a pattern emerges that is laden with clues to understanding complex international developments and, tangentially, Lebanon’s economic history and current economic quandary.
1. Capitalism, past and present The precepts For the best part of seven decades, Lebanon’s strain of capitalism was extolled roughly in the following terms: a) it is a system that sanctifies
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private ownership of personal and business assets, and the freedom to use these assets without legal or regulatory hindrance; b) State intervention is condoned only to prop up the market economy (and its stalwarts); and c) trade openness and the unrestricted movement of capital are essential to generate affluence (directly at the crest, and through ‘trickle down’ for the rest). Notionally, economic policy in such a system should have been conducive to capital accumulation in all sectors of activity; after all, that’s what capitalism is about, and that’s whence it derives its name. In reality, however, that was not the case. The halcyon days Lebanon’s brand of capitalism was best exemplified by the emergence in the nineteen-fifties of Beirut as a trading, banking and financial center for the Levant and beyond. This came about primarily as a result of colonial investments in the city, but also in the wake of the de-industrialization of Mount Lebanon, followed by the ruinous
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impact of the First World War on that once-prosperous region. Trade openness, free movement of capital, and a stable currency were key to the city’s – or more appropriately, the city-state’s – role as a regional provider of all forms of services. In such a system, capital naturally flowed to segments of activity that required less of it, attracted by comparatively high gains and rapid accumulation of wealth. In that era, success in the race for riches entailed weaving solid commercial and financial interests with the countries of the region.
come ‘annex’ as a lodging place for wealthy tourists. As for the country’s peripheral regions and the city-state’s poverty belt, they were deemed to be an imposed encumbrance, not worth spending much of the recurring State budget surpluses on their development. In the eyes of its beholders, the city-state, with its oversized port, its commercial links with the region, its competencies in the provision of services to that region, could have remained über alles had it been on its own, insulated, protected, cocooned, and not “a piece of the continent, a part of the main.” The halcyon decades ended with the internal war.
The three decades to the mid nineteen-seventies were deemed to have validated this paradigm. The city-state built itself a modern cosmopolitan façade, an alluring display window so necessary for the conduct of regional business; a Potemkinesque deception if there was one. Beyond the façade, Mount Lebanon was a wel-
2.Democracy and social policy Equally lauded was the country’s parliamentary democracy, but that was – and still is – also a peculiar variety of governance. Whereas the elected legislators in Western democ-
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This systemic failure to accept the redistributive rationale of fiscal policy has fossilized a raw form of capitalism, one that had ceased to exist in advanced industrialized countries. racies had to adopt social policies with an egalitarian tinge at the behest of their voters and faced the threat of not being re-elected should they fail to legislate in that direction, Lebanon’s parliamentarians were not under such obligation, as repeat votes were theirs by ‘tribal’ and confessional right. Whatever socially motivated measures or projects were undertaken throughout the decades of prosperity, reflected the will, moral standing, or statesmanship of those who instigated them. The system’s bouncers made sure daring socially motivated initiatives were stifled in the crib, and such measures and projects were scant indeed. This systemic failure to accept the redistributive rationale of fiscal policy has fossilized a raw form of capitalism, one that had ceased to exist in advanced industrialized countries. To different degrees, these countries had gone farther away from the primitive and callous system toward the welfare state, a form of
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governance that not only did not depart from capitalism, but it plainly reinforced it morally and ideologically. Then came globalism.
3. Globalism: Ideology or historical process There are two misleading notions propagated by the globalist literature: The first is the use of the term ‘globalization’ in instances where the term ‘globalism’ – or more appropriately ‘global statism’ – ought to be used (no minor semantic matter), and the second is the charge that opponents of globalism are against the fusion of activities and aspirations that make the oneness of humanity. On the latter point, no words ring more forebodingly pertinent than those of J.M. Keynes, uttered more than eighty years ago: “Ideas, knowledge, art, hospitality, travel – these are the things which should of their nature be international. But let
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goods be home-spun whenever it is reasonably and conveniently possible, and above all, let finance be national.” Globalism is primarily an ideology; globalization is a process. As a process, globalization is neither a historical imperative nor is it necessarily a vector of progress, and its opponents are certainly not retrograde nationalists who embrace völkisch ideas. As an ideology, globalism triggered, guided, and expanded the damaging variety of globalization, namely financial globalization. Heralded by financial deregulation in the United States, which started in the late nineteen-seventies with a string of legislations that unbound greed and the yen to dominate, the globalist ideology gained ground and countries, shrewdly
As an ideology, globalism triggered, guided, and expanded the damaging variety of globalization, namely financial globalization.
“Ideas, knowledge, art, hospitality, travel – these are the things which should of their nature be international. But let goods be home-spun whenever it is reasonably and conveniently possible, and above all, let finance be national.” propped up as it was by international financial institutions. With the consequent evanescence of national financial boundaries and jurisdictions, the reins of global-level financial manipulation were placed in few hands intent on pushing for more control and more concentration of wealth. In this process, some of the very foundations of Western democracy were gradually nibbled away to varying degrees in different countries. Long accumulated ‘social gains’ are anathema to globalist ideology. Thus, the first foundation of democracy that had to go was accountability to the electorate, to be replaced by accountability to global financial institutions and transnational conglomerates.
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.. the first foundation of democracy that had to go was accountability to the electorate, to be replaced by accountability to global financial institutions and transnational conglomerates. Lebanon had an edge on that count. After a decade and a half of basking in the carnage of an internal war, the economy of the early 1990s had to re-integrate within a radically different world than the one it had left when it took time off to attend to warfare. Reintegration, it was commonly thought, could occur painlessly since the economy was as unencumbered as ever by social obligations to its workforce. And its parliamentarians were also as free as they have always been from the burden of being held accountable for the socially-minded legislation they had so deviously failed to enact. On the economic front, the credo of laissez faire, trade openness, and the rekindled – but irra-
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tional – aspirations to regain a regional role in commerce and finance, conspired to fashion the self-image of modern-day Phoenicians traders and middlemen as old-hand globalists. And of course, a display window had to be rebuilt and was placed under private stewardship with a mandate to price the plebs out of its bounds. Facetiously, impish analysts of those days harped on about the enlightened foresight that led to the embracement of globalism well before the term gained currency. The sneer was not viewed as such, and it echoed – seriously, amusingly. The irony took on a tragic turn with the increasing pauperization of the labor force, as measured by the steadily diminishing share of wages in Gross Domestic Product. So much for prosperity trickling down. Trade openness and the discretionary control over business capital induced the displacement of a number of manufacturing concerns to ‘wage
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havens’ in the region, thus conferring a peculiar meaning to corporate social responsibility. At the public sector level, fiscal policy was summoned to provide the tools for the further compression of the share of wages in national income. Regressive taxation and unbridled public borrowing were the most injurious of these tools. Adding insult to injustice, this nefarious redistribution of income and wealth was incessantly coupled with the mendacious claim that in the phase of reconstruction, the economy could not afford the cost of instituting a modicum of social justice. Through thick and thin, the plutocracy has evoked State indigence as a lame justification for unwillingness to introduce policies that provide basic social protection and equal opportunity for all.
Trampling on national sovereignty on the altar of dysfunctional federations invariably revives nationalism, either in its virulent variety or in its more judicious version.
At the public sector level, fiscal policy was summoned to provide the tools for the further compression of the share of wages in national income. Regressive taxation and unbridled public borrowing were the most injurious of these tools. Capitalism is what policies make of it. As a guiding model for economic management, capitalism may be viewed as being ideologically insipid, but the shortsighted and unenlightened economic policies of Lebanon’s ruling posse have rendered the country’s strain of capitalism plainly unpalatable.
4. The national sovereignty backlash: the emergence of post-globalist capitalism Financial deregulation, the overpowering sway of mega supranational financial corporations, and the emergence of corporatocracies in a number of Western countries have led to the financial implosion of 2008 and are paving the way for an
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even more destructive collapse, topped off with a cataclysmic currency pole-shift this time around. Writ large is the fact that globalism did not survive its first major economic crisis. Trampling on national sovereignty on the altar of dysfunctional federations invariably revives nationalism, either in its virulent variety or in its more judicious version. And because what is past is prologue, the reaction should have been predictable. The backlash is history in the making; it is generating strong centrifugal forces that are beginning to splinter supra-national behemoths and treaties. Of these, the triple T treaties express nothing less than the consummation of war alignments and attempts to consecrate the power of transnational conglomerates over signatory governments. Ironically, these treaties were partly designed to parallel the World Trade Organization, which globalists view as having tolerated a ‘disruptive’ say and sway to ‘maverick’ countries.
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Compared with this level of threat, the backlash is reasoned indeed; it calls for the law of the land to be homegrown and holds that certain national interests ought to supersede compliance with the interests of global financiers. The historical process has been engaged and the globalist interlude in the history of capitalism is on a waning course. This is so because the misshapen, global-statist form of capitalism has lost its ability to kindle hope for more material progress and by the same stroke, its institutions have lost the confidence of those who are under its yoke. Growing awareness of the deceitful and disruptive social, political, and security ‘engineering’ wrought by globalism will help lay the moral foundations of the emerging version of capitalism.
The backlash is history in the making; it is generating strong centrifugal forces that are beginning to splinter supra-national behemoths and treaties.
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Viewed from that perspective, factors such as election outcomes in first-world countries are of second-order importance. These outcomes may hasten or slow down the process of change, but that process is a manifestation of deeper undercurrents and hence there is hardly a conceivable stratagem that could marshal critical force to induce a reversal.
5. A template for reforms Saddled by a massive and unpayable public debt, fast-degrading governance, and complex geo-political risks, Lebanon’s polity is in no position – ethically and practically – to retort the well-merited castigation of globalist financial institutions. While admitting that the system can hardly be tweaked out of its predicament by patchy reforms, a guiding template may be drawn that is meant to focus research on the fundamental flaws of the obsolete paradigm.
the past quarter century has proven that it is impossible for Lebanon’s economy to replicate past prosperity just by clinging to the trade openness ideal, notwithstanding the notional advantages of free trade. The primary premise is that the past quarter century has proven that it is impossible for Lebanon’s economy to replicate past prosperity just by clinging to the trade openness ideal, notwithstanding the notional advantages of free trade. For one, traders have lost considerable ground in regional triangular trade, and have been marginalized by the emergence of larger regional capital and markets. And, of course, the warehousing, transit, and rotating-platform functions – relic buzzwords from the nineteen-seventies – have been bypassed and outclassed by fast regional infrastructure development. As for the web of commercial interests weaved with the region, it proved to be too fickle to withstand the emergence of markedly better-capitalized regional trading houses.
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.. economic reform needs to be structural and focused mainly on capital accumulation in the goods producing sectors – manufacturing industries and agriculture
Hence, economic reform needs to be structural and focused mainly on capital accumulation in the goods producing sectors – manufacturing industries and agriculture – in order to narrow down sectoral disparities, however moderately. Arguably, a larger measure of sectoral balance would result in a more sustained and stable growth as the economy’s over-dependence on some of its sectors and some of its regional economic ‘partners’ would be evened out. Economic efficiency and equity, the normative principles of public finance, need to be established as policy guides. And it is only when this is achieved, would the functions of allocation, distribution, and stabilization be effectively fulfilled, and the merits and the solid theoretical
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grounds of a secular equilibrium in State finances be confirmed and espoused. A social policy needs to be formulated that ought to be anchored to the principle of instituting equal opportunities for all. With Lebanon’s Gini index nestled so high on the global scale, analysts may want to revisit the chapter on the redistributive powers of fiscal policy. By the same stroke, they may also have to ponder over the role of these powers in heightening work incentives, establishing a national work ethos, and spurring growth. Reform also calls for dismantling kleptocratic institutions, eradicating corruption, penalizing the wasteful and improvident management of communal assets, and thwarting rent-seeking and other predatory economic activities. Barring lightning, deep and all-out reforms, Lebanon’s governance and the tribulations it wrought will make amusing cartoon depictions in treatises on desolation economics.
retail activity indicators | second half of 2016
APPENDIX
Categories and sub-categories of retail goods and services for which sales indicators were built The report analyzed retail sales data relating to six categories of consumer goods that include a total of 37 sub-categories and three categories of services grouping 15 sub-categories. Following are the categories and sub-categories of retail goods and services covered by the report.
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Appendix - table 1 categories of goods 6 Clothing and fashion
Cosmetics
sub-categories 37
categories of services 3 )sub-categories 8(
Men’s wear Women’s wear Women’s accessories Children’s wear Family clothing Shoes Apparel Fabric / sewing Perfumes Cosmetics Personal care
)sub-categories 11( Sanitary / utilities Glass / paint / wallpaper Hardware Furniture Floor covering Drapery / upholstery Miscellaneous home furnishing Household appliances Audio-visual Antiques restoration Crystal & glassware
Luxury items
)sub-categories 7( Jewelry / watches / silverware Crafts Art dealers galleries Florists Cigars Gifts Electronics
Food & beverages
Sporting goods Games / toys Music instruments
)sub-categories 3(
)sub-categories 5( Supermarkets Confectionery Bakeries Miscellaneous food stores Liquor / beer / wine
sub-categories 15
Hospitality
)sub-categories 4( Catering Restaurants Pubs / nightclubs Hotels / resorts
Tourism & entertainment
)categories 6( Travel agencies Travel services Movies / theaters Dance schools / studios Tourist attractions / exhibits Clubs
Medical services
)sub-categories 5( Doctors Dentists Ophthalmologists Hospitals Other medical / health services
)sub-categories 3(
Household goods
Sports and hobbies
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Appendix - table 2
retail activity indicators | second half of 2016
Monthly retail sales indicators for consumer goods Fashion & clothing
Food & beverages
Cosmetics
Household goods
Luxury goods
Sports & hobbies items
Jan-16
62.77
84.40
73.29
59.92
50.08
58.24
Feb-16
57.04
83.02
89.02
53.48
53.80
64.75
Mar-16
63.04
93.45
68.92
54.65
53.59
53.93
Apr-16
60.51
86.56
124.71
55.79
48.98
52.96
May-16
66.64
89.78
124.78
62.09
57.29
50.25
Jun-16
68.18
88.13
114.82
66.40
55.51
51.19
Jul-16
83.59
94.43
141.13
68.58
60.01
60.93
Aug-16
76.39
96.94
112.87
71.15
64.15
55.83
Sep-16
58.61
93.29
145.51
60.49
54.89
53.22
Oct-16
57.43
91.72
99.71
57.81
51.47
57.61
Nov-16
59.26
88.62
95.41
65.12
55.61
56.32
Dec-16
96.34
146.25
133.61
104.82
113.67
151.43
Quarterly retail sales indicators for consumer goods Q1-2016
Q2-2016
Q3-2016
Q4-2016
Fashion & clothing
60.95
65.11
72.86
71.01
Food & beverages
86.95
88.16
94.89
108.86
Cosmetics
77.08
121.44
133.17
109.58
Household goods
56.02
61.43
66.74
75.92
Luxury goods
52.49
53.93
59.68
73.58
Sports & hobbies items
58.97
51.47
56.66
88.45
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Half-yearly retail sales indicators for consumer goods H2-2016
H1-2016
H2-2015
H1-2015
H2-2014
H1-2014
Fashion & clothing
71.94
63.03
69.43
68.15
77.43
74.66
Food & beverages
101.88
87.56
82.97
75.14
79.22
63.24
Cosmetics
121.37
99.26
116.99
98.05
106.24
93.42
Household goods
71.33
58.72
70.17
57.46
73.08
67.28
Luxury goods
66.63
53.21
58.02
58.65
66.76
56.42
Sports & hobbies items
72.56
55.22
55.77
52.62
63.37
46.10
Yearly retail sales indicators for consumer goods
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2013
2014
2015
2016
Fashion & clothing
80.74
76.04
71.50
67.48
Food & beverages
67.33
71.23
83.09
94.72
Cosmetics
95.46
99.83
112.43
110.32
Household goods
72.16
70.18
66.01
65.02
Luxury goods
58.46
61.59
63.82
59.92
Sports & hobbies items
51.97
54.73
61.36
63.89
retail activity indicators | second half of 2016
Previous editions of the Retail Activity Indicators report
Covers 30 months till June 2015 Published on August 10, 2015 90 pages
Covers 36 months till December 2015 Published on February 15, 2016 109 pages
Covers 42 months till June 2016 Published on August 10, 2016 106 pages
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www.LFAlebanon.com
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