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Retail Sales Surge In May As Indians Shrug Off Inflation To Binge On Restaurant Food

Retail sales grew in May suggesting strong demand as consumers were willing to spend, particularly on eating out, despite surging inflation.

The value of purchases rose 24% last month compared with May 2019 or pre-pandemic levels, according to data from the Retailers Association of India released on Thursday. Sales rose 60% year-on-year on a low base.

The surge in May, reflected both in strong demand and higher prices, was led by consumers increasing their spending in restaurants.

Quick service restaurants saw a 42% jump in sales during the month over 2019 levels, while footwear retailers followed with a 30% rise, according to the RAI’s Retail Business Survey. The association tracks countrywide sales of both large and mid-sized retailers.

Beauty, wellness and personal care, which was still in the negative territory in April, also reported growth. It rose 9% in May over 2019.

Clothing and apparel grew 24% versus 2019 levels.

Sales in west India rose 30%, while retailers in the east reported 29% growth in business, the survey said. The south saw a growth of 22%, while north reported a 16% rise over the pre-pandemic month of May.

“It is encouraging to see a steady improvement in sales,” said Kumar Rajagopalan, chief executive officer at RAI. “With outdoor activities picking up, categories such as quick service restaurants and footwear are indicating rapid growth, while categories such as garments are also beginning to do well on account of the ongoing wedding season and due to resumption of work from office.”

Despite concerns around inflation, customers are willing to come out and shop as socialising picks up pace, Rajagopalan said.

Consumer inflation has been on the rise since October 2021. It softened marginally to 7.04% in May, from an eight-year high of 7.79% in April, aided by a favourable base, showed data released by the Ministry of Statistics and Programme Implementation. Still, it remains above the RBI’s tolerance level of 6% for the fifth straight month.

Unlike in the developed nations, where a sizeable part of inflation is demand-pull, in India it’s partly cost-push and in part impacted by the vagaries of food inflation.

“Food continues to remain the main driver with a nearly 50% contribution to total inflation,” said Rajani Sinha, chief economist at CARE Ratings Ltd. “We estimate the CPI inflation to average around 6.5% in FY23, with an upward bias. The protracted war situation and the resultant high crude oil prices pose an upside risk to our inflation expectations.”

Sinha expects consumer inflation to remain above RBI’s upper tolerance limit owing to elevated crude and commodity prices for the next few months. This could potentially hurt demand for discretionary products.

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