The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A BISX-listed food retailer’s disclosure of “price deflation” in some product categories should inspire improved consumer confidence heading into 2024, a Bahamian businessman argued yesterday.

Sir Franklyn Wilson, the Arawak Homes and Sunshine Holdings chairman, told Tribune Business the assessment by Gavin Watchorn, AML Foods president and chief executive, has the potential to “change the mood” surrounding post-COVID cost of living concerns and provide the Bahamian economy with “upward momentum” heading into the New Year.

With inflation, especially in food and energy costs, dominating consumer thinking over the past three-and-a-half years, he said any reversal of this “narrative” will be “very material and significant” when it comes to boosting consumer demand and spending.

Mr Watchorn, in reporting on AML Foods’ second quarter and half-year results for the six months to end-October 2023, said there were signs that food prices are falling “in certain categories” - though not across-the-board.

“Our second quarter performance was impacted by several external and internal challenges,” he told shareholders. “Customers’ average basket size remained depressed, declining by 6 percent during the period, impacting both sales and margin performance.

“We are now seeing price deflation in certain categories, and while this may impact the average ticket, we welcome the relief these adjustments will bring to our customers.” The Solomon’s and Cost Right operator added that sales for the three months to end-October 2023 rose year-over-year by 3.3 percent or $1.4m to $43m, although its net loss increased from $300,000 in 2022 to $500,000.

Mr Watchorn’s commentary did not signal how widespread the food price deflation, or reductions, are, and whether such trends are likely to be sustainable. However, Sir Franklyn seized upon it as something that could alter “the sour mood” among Bahamian consumers that has resulted from the squeeze imposed by higher living costs, which has resulted in many struggling to cover every-day bills and make ends meet.

“It’s significant,” he added of Mr Watchorn’s comments. “I thought that’s certainly different from what we’ve listened to for the last extended period of time. When you have this narrative about inflation and the cost of living being high and climbing and so forth, inevitably it impacts consumer confidence.

“You can almost talk yourself into a recession. You can almost talk yourself into it because of inflation. To the extent there is this changed position is very material because it’s happening in the holiday season, and it’s only a matter of time before it impacts other areas and affects the likes of housing and construction.

“It could change that mood. It’s a significant signal that impacts consumer confidence. If we just get a sense that there’s going to be some abatement on inflation that’s very significant,” Sir Franklyn continued. “It also comes at a time when the Federal Reserve in the US has paused increasing interest rates, and said that they anticipate at least three rate reductions in 2024.

“When you combine that with what the chief executive of AML Foods is reporting in relation to prices going down - that US interest rates are not going up - that combination is really, really good news for The Bahamas. There’s a significant basis for consumer confidence; very significant.

“Once you say the cost of living is high and going up and so forth, that puts people in a very sour mood. Once that is no longer the narrative, and people discontinue it, that’s very significant in my view. When you combine that with the news from the Federal Reserve, that gives you the basis for confidence going into 2024 - that there are some things that are going to be positive and will help upward momentum in the economy generally.”

The International Monetary Fund (IMF), in its Article IV statement on The Bahamas, said: “After peaking at 7.1 percent in July 2022, inflation has fallen steadily to 2.3 percent in July 2023, largely driven by the fall in global energy prices.”

However, it warned that “renewed pressures on global food and oil prices could impose a burden on lower income households and put pressure on the balance of payments”. And the Bahamas National Statistical Institute (BNSI), unveiling September’s consumer price index, said inflation rose by 0.2 percent month-over-month compared to August and by 2.2 percent year-over-year.

“The monthly inflation rate in The Bahamas, which represents the overall change in prices for 2023, increased by 0.2 percent when compared to August 2023,” the BNSI report said. “On a month-to-month basis, the top two categories consisting of education, along with restaurants and hotels, saw increases of 4.5 percent and 2.3 percent, respectively.

“Meanwhile, furnishings, along with health and recreation and culture, saw declines of 4.8 percent, 2.9 percent and 2.5 percent, respectively, for the month of September when compared to August 2023. On a year-over-year basis, the CPI rose a little over 2 percent over the same period last year in 2022.

“The major categories that contributed to this rise included alcoholic beverages, 6.5 percent; electricity, gas and other fuels, 5.8 percent; and health, 5.3 percent, respectively.”