At the same time, the prices of the item, surveyed by the GBA Ecolatina CPI, rose 55% y.a. in the same period. Consequently, billing in real terms grew 8.3% YoY, ending a streak of three quarters in the red. However, the year ended with a cumulative drop of 8.1% compared to 2019, returning to 2011 levels.

The last growth cycle for the sector had been 2017 (+7.5% y.a.), a process that was abruptly interrupted starting in the second quarter of 2018 as a result of successive exchange rate corrections and the subsequent increase in credit prices, recalls the report from the consulting firm Ecolatina.

In this way, after accumulating a decline of close to 35% in the last three years, the sector ended 2020 with greater signs of recovery than expected in an environment favorable to the demand for durable goods, encouraging better prospects for this year. Let's see.

What factors determined the dynamics during 2020?

The performance of the sector - as well as durable goods as a whole - went through two clearly dissimilar stages during the pandemic/quarantine. During the first weeks, marked by the strictest phase of restrictions on the activity and mobility of people, the sales volume fell sharply (-20.5% YoY in the second quarter), even compared to the meager comparison base that 2019 had left.

On the other hand, starting in the second half of the year, a noticeable recovery was observed, accompanied by a persistent improvement in consumer confidence: the Appliances category within the Consumer Confidence Index during the last quarter was, on average, 53% higher than a year ago.

There were different drivers that influenced the good performance of the sector. Firstly, the pandemic/quarantine modified the demand towards consumption within the home, mainly favoring, in terms of higher turnover, sales of the computing and information technology, cell phones, televisions and Appliances (kitchens, ovens, microwaves, heaters), associated with the greater time spent by people to carry out their work and leisure indoors.

Secondly, the relaxation of restrictions came with improvements in financing plans (a key tool in the sector), led by Ahora 12, at a time when the exchange rate gap climbed and devaluation fears grew after a new tightening of the stocks towards September. These factors overturned the incentive scheme for the consumption of durable goods with high imported components, contrasting with the evolution of non-durable consumption in supermarkets, shopping malls and retail stores. On the other hand, the online sales events Hot Sale (July) and Cyber ​​Monday (November) gave an additional boost to purchases.

It is worth noting that the boom in sales occurs despite a drop in real wages in both pesos and dollars in a context in which products in the sector even became more expensive in relative terms to the rest of the goods in the economy. Indeed, while registered private salaries grew at 34% y.a. In December, the CPI advanced 36% y.a. and the prices of the item rose 50%.

At the same time, the reopening of activities and the need to rebuild stocks drove industry shipments: the production of computer, television and communications equipment and devices and household appliances expanded 21% y.a. and 23% i.a. respectively in the second half, leaving behind the falls of 37% and 29% in the first part of the year.

What are the prospects for 2021?

Although this “summer” of consumption would be short-lived, if there were not an abrupt exchange rate correction - something that we do not foresee in the short term - the reactivation would extend over the coming months, establishing the sector as one of the engines of growth in 2021. Likewise, to the dynamics described are added the expectations of greater demand associated with the recovery in residential construction.

It is interesting to note that the atypical scenario described above would continue to allow growth in sales even when the real salary (and in dollars) does not experience improvements in real terms until the second part of the year and that this growth would not be enough to compensate for the ground lost during 2020.

Now, since a part of this growth responded to the advance of purchases in view of a devaluation, it is likely that demand will moderate its strength in the future. In the same sense, the supply restrictions registered in some marketing chains, in addition to exchange rate uncertainty - not only about the price of the official dollar, but also about access to the exchange market - have put pressure on inflation in recent months. In this framework, the tightening of controls on imports and the purchase of dollars for production could stop the dynamics that we have been observing.

Market Magazine