If you don't know the context, statistics are meaningless—Andrew Gelman
Q3 2021 Retail GDP Boom? Peso Sales of SM, Robinsons Retail, Puregold, 7/11, and SSI Says No!
Economist Diane Coyle, in her book “GDP: A Brief but Affectionate History - Revised and expanded Edition” explained in her introduction, “why even small changes in GDP can decide elections, influence major political decisions…”
Statistical growth as an instrument of politics, Proof?
From ABS-CBN Tweet, November 15: Pres. Duterte touts 7% GDP growth in 3Q 2021 credited to 'strong household consumption' during pandemic: "This is truly a good & welcome news because it affirms our strategies are correct in balancing health & economy."
Figure 1
Because of the supposed substantial rebound in consumer spending, authorities say the retail GDP has reached pre-pandemic levels.
While Retail (real) GDP soared 7.6% in Q3 (NGDP 8.6%), its Nominal GDP hit a record Php 788.39 billion!!!
How valid is this claim?
To countercheck, here are some actual references.
Not even the low-base effect buoyed SM’s merchandise sales, which dropped 9.9% YoY in Q3. In peso, merchandise sales regressed to 2017 levels!
Figure 2
Supermarket chain Puregold posted a mild .29% contraction of net sales in Q3 to mark the third consecutive quarter of deficits. 2021 had been an antithesis of 2020. Sales blossomed in 2020, especially in the 4Q, which broke to record highs. The latest pullback brought its sales down to the 2019 level!
Multi-format chain Robinsons Retail posted an 8.6% sales growth in Q3. But that’s mainly due to the low base effect. In peso, net sales have retraced to 2018 levels!
Sales of high-end retailer SSI group jumped 28.3 % in Q3, following an explosive 292% growth in the 2Q. Sadly, the % gain signifies a mirage from the low-base effect. In peso, the bounce from the 2020 bottom appears not only to have stalled but has been sliding lower. Q3 sales had been substantially below the 2017 levels! Amazing.
It’s the same story for convenience store giant Philippine Seven Corporation. Sales growth registered 9.95% in Q3, following a 16.06% growth in Q2. The improvement in % sales was a result of, again, the low base effect. In peso, 7/11 sales regressed to 2018 levels.
Figure 3
Was there a retail sales boom in Q3?
Certainly not from the standpoint of the sales of the above retailers.
Since 2018, retail GDP and sales of these firms appear to have been tightly correlated. The correlation seems to have ended in Q2 2021, where the GDP demonstrated a boom while sales had been stagnant.
The most striking feature from our charts is the cumulative sales of the retail 6 (SM, RRHI, PGOLD, SEVN, SSI, and WLCON) as a percentage share of the GDP. The share of sales of these titans plummeted to a multi-year, if not a record, low in the last two quarters!
WLCON’s sales chart was presented in this space last October.
Operation PSEi 7,000: WLCON’s Mania Anchored on the Mirage of the Statistical Low-Base Effect! October 31, 2021
Embedded in the GDP’s assumption that the sales of non-listed firms from the broader economy boomed!
Or, it implies that sales growth of the surviving Small and Medium Enterprises and other non-listed bigger retail outlets not only zoomed but outperformed the titans!
What a hypothesis! Incredible!
And this excludes the discussion where growth actually took place: Debt!
Nota Bene: Due to the lack of data, excluded here are MRSGI, HOME, and MM.
Figure 4
And it is not just retail. The food chains have suffered as well.
I showed Jollibee’s chart last week. Here it is again.
The 3Q GDP 7.1% Ramp: A Consumer Boom in the Metaverse Economy; Mistaking L-Shaped Recoveries with a Low-Base Effect Boom, Public Spending as Key Driver November 14, 2021
Because of the low base effect, the largest food chain Jollibee’s domestic sales growth spiked by 35.8% and 80.5% in Q3 and Q2. But baseline peso sales have dropped to 2016 levels!
Pizza chain Shakey’s (PSE: PIZZA) suffered the same story. While sales vaulted 13% and 36.94% in Q3 and Q2, the peso sales appear to be plumbing back to the test the lows of 2020!
The sales performance of the retail giants and the largest food chains have chimed on its assessment: The reopening showed minor improvements. The consumer boom in the GDP represented a statistical mirage from the low baseline of 2020.
Or…
The 3Q GDP boom represents a politically colored statistical illusion.
Wrote George Orwell in 1984: War is peace, freedom is slavery, and ignorance is strength.
Tailor-fitting this today: Stagnation is growth!
Yours in liberty,
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