With income failing to keep up with soaring commodity prices, consumers have now cut back on their spending, posing a fresh headwind for the country's ongoing V-shaped recovery from pandemic-led downturn.
Limited-income people, in particular, are feeling the pain of sticker shock as never before – almost all daily essentials are going beyond their reach, forcing them to forego usual purchases and look for cheaper alternatives.
Prices of rice, flour, pulses, oil, fish, meat, vegetables, soap and milk rose 12% in February, according to a report by Consumers Association of Bangladesh.
According to the latest Consumer Price Index and Labour Force Survey report by the Bangladesh Bureau of Statistics (BBS), consumer prices in the country rose by 6.17% year-on-year in February. On the other hand, the wage rate of the working people increased by only 6.03% at the same time.
Private consumption accounts for 69% of the country's GDP, according to government data.
To see how consumers are tightening their belts by cutting non-essential spending, take Amjad Hossain, owner of an eatery at Mogbazar's Dilu Road. A month back, he would require 30-32 kilograms of flour a day to make roti and paratha at his restaurant but now he is using 24-25 kg as diners start to stay away from his modest place.
Rotis became smaller and he now uses a few drops of oil to fry parathas with its current astronomic price.
"Our sales have been going down since February. We have reduced the amount of food preparation too than a month ago," said Amjad.
Many small and big restaurants in the capital had to reduce the amount of food they serve to their customers without hiking prices to keep customers happy. Nevertheless, customers are mainly staying away from restaurant food because with no income growth, they are grappling with rising cost of living.
To balance spending with income, middle- and lower-income households are now cutting back on cost by eating less. They are also using less oil and spices in cooking.
They are now careful to spend unless it is essential, as reflected in declining sales of mobile and electronics products. Be it in Dhaka's Karwan Bazar or Chattogram's Khatunganj wholesale market, the consumers' response to buying necessary goods for the upcoming Ramadan is lukewarm.
Traders claim that sales of daily commodities in the retail markets are also lower than usual.
While buying baby food or cosmetics, consumers are now going for smaller packs. On the other hand, fashion houses are worried about their turnaround with big sales ahead of Pahela Baishakh and Eid as consumer spending is shrinking.
Economists say consumers now are not buying non-essential products, such as clothing, furniture, electronics and other luxury items to meet additional food costs as their income growth is lower than the inflation.
Dr Ahsan H Mansur, executive director at Policy Research Institute, told The Business Standard, "Wages of day labourers are not keeping up with rising commodity prices. So they are unable to buy the amount of food they used to earlier."
The working-class people's real income has decreased, he added.
When income falls, the first casualty for the low income people is their food intake. To make ends meet, many people take their children out of schools and send them out for work, he noted.
Many are forced to forego medical expenses, leading to a loss of future productivity, the economist added.
Consumers looking for cheaper alternatives
Rising commodity prices are pushing limited-income consumers to go for cheaper products. In the case of rice, they no longer seek out premium quality. They are buying non-branded products in a smaller amount.
Sabbir Ahmed, owner of a rice shop in Dhaka's Segunbagicha kitchen market, told TBS many of his customers, who used to get fine rice earlier, are now opting for coarse rice.
Miniket variety now costs Tk66-Tk68 per kg, while coarse one is sold at Tk50-Tk55, he said.
"My fine quality rice sales dropped to 50 kg a day from 80-100 kg a few days ago," Sabbir said.
Aminul Islam, a vegetable seller in the same market, said his sales are declining too because of high prices.
He now cannot even sell 5 kg of pointed gourd (potol) a day as it costs Tk80 per kg. The people are also refraining from buying other expensive vegetables, such as brinjal, pumpkin, bitter gourd and lemon.
The consumers are mostly buying potatoes and tomatoes that now sell cheaper, Aminul said.
The middle-class people, who used to buy from super shops, are also looking for cheaper alternatives.
Shamim Ahmed Jaigirdar, head of Operation at Meena Bazar, said sales of cosmetics of brands, such as Square, Unilever, have dropped significantly over the last few days. Sales in February were down 8% month-on-month.
Sales of vegetables have also declined significantly. Besides, the people are now buying small packs of soap, oil and shampoo, he added.
Fashion houses stare at dull Eid business
Fashion houses in the country were gradually bouncing back from Covid-induced losses. After logging good sales in the winter, they were expecting good business in the summer season as well. But rallying commodity prices have made them apprehensive that their business recovery will get hit during the forthcoming Pahela Baishakh and Eid festivals.
Traders, however, told TBS that even though the volume of their current sales is below the normal level, it is still satisfactory.
Shahin Ahmed, president of the Bangladesh Fashion Designers' Association and owner of Anjans, said, "The coronavirus and inflation have already made a dent in people's pockets. As a result, we haven't taken much preparation for this Pahela Baishakh, but our preparation for Eid-ul-Fitr is good."
Electronics, motorcycles sales at slow pace
Sales of electronics products including TVs, refrigerators, and mobile handsets were quite normal even amid the peak of the pandemic. On the other hand, motorbike sales that witnessed sloth during the pandemic peak in 2020 recovered quite well in 2021.
But, the recent surge in prices of essentials has taken a toll on the sales of these products. There has been a negative 5% growth in mobile phone sales since February this year, sales of the low-cost motorcycles have also fallen into a somewhat slow growth trajectory.
SM Rejoan Alam, chief business officer (CBO) of Walton Mobile, said electric products usually see high growth in sales during summer but the trend is not the same this year. Mobile phone sales also are lower compared to last year, he added.
Biplob Kumar Roy, general secretary of the Bangladesh Motorcycle Assemblers and Manufacturers Association (BMAMA), said the demand for high-capacity bikes is on the rise since the industry began to reduce the prices for manufacturing them locally.
But, the demand for cheaper two-wheelers has dropped significantly, reflecting the hesitation of cost conscious customers.
Demand for fast-moving Ramadan items yet to pick pace
Sales of commodities that remain fast moving during the month of Ramadan usually go up at Khatunganj in Chattogram, the largest wholesale market for daily commodities in the country, since Shab-e-Barat and keep rising up to the start of Ramadan. At the same time, prices also go up.
But the turnover is less than usual this year. Besides, prices of commodities also are in a rather downward trend.
Azizul Haque, proprietor of Haque Trading, a consumer goods trader in Khatunganj, told TBS that before Ramadan, usually this time of the year, congestions of transport vehicles are created from the Kotwali intersection of the port city to Khatunganj, thanks to the huge sales pressure in the wholesale market. But this year sales in the market are so low that there are hardly any transport vehicles in the market.
Habibur Rahman, proprietor of Bhai Bhai Store in Karwan Bazar, the largest wholesale market in the capital, said demand for daily commodities including gram, rice, pulses, and oil has increased to some extent ahead of Ramadan, but the increase is much less when compared to the previous years.
Most of the consumers are now looking for cheaper products, he added.
Hotel business in a fix
The rallying commodities have put eatery businesses in a difficult situation. To cope with the situation, most hotels have opted for reducing portion size instead of hiking the price. But many of them could not but raise the prices of some items including fish, meat, and vegetables in the wake of unusual hikes in the prices of these commodities in recent months.
As such, footfalls at restaurants are dropping gradually.
Tahmina Ferdousi, chief operating officer of online food delivery service HungryNaki, said the amount of food served may have decreased in hotels. As such, the prices of the items have not increased that much. Besides, the food delivery companies are retaining the consumers through various offers. As a result, although growth has slowed down, sales have not slowed down as yet.
Fahim Ahmed, chief executive officer of Pathao, said as his company focuses on customers who prioritise quality and service over discounts, order growth in Pathao Food is yet to slow down.
He, however, expressed concerns that the situation may take a turn for the worse in the coming days if commodity prices keep surging.