The employment figures for the national economy have a direct effect on retail demand, and consequently the employment figures of the retail sector. Commerce represents the largest employer in the service sector, providing jobs to almost 300,000 Finns.
The employment figures for the retail sector have been trending downward since the summer of 2018, and after a six-month levelling period, continued their descent throughout the autumn of 2019. This downward trend also continued in January and February 2020.
”The impact of the coronavirus pandemic is not yet properly reflected in our statistics, but the pandemic will contribute to the accelerated decline in the retail sector’s figures,” notes Chief Economist Jaana Kurjenoja from the Finnish Commerce Federation.
Demand from industry and other service sectors as well as construction have supported the employment figures for wholesale trade in the last few years, but there is increasing evidence that the growth in wholesale trade employment may also have ceased. The coronavirus crisis is set to affect wholesale trade a little later than retail trade, and this impact will be magnified by a possible slowdown in construction and industry.
This estimate is supported by the explosive increase in daily calls to the Finnish Commerce Federation’s helpline. The Federation has received numerous calls, sometimes even two hundred per day, from people who need advice on their upcoming co-operation negotiations and layoffs.
“Based on the number of people who are contacting us, both the specialty goods and technical wholesale sector expect the issues to continue well in to the summer,” says Labour Market Director Anna Lavikkala from the Finnish Commerce Federation.
Retail trade set to decrease – trade in specialty goods expected to crater
In January and February, the Finnish Commerce Federation predicted that retail trade turnover would increase by around 1% and continue its steady growth, although at a slower pace than before the financial crisis. According to a more recent forecast made in March, retail trade turnover is set to decrease by 2% this year provided that the world economy can quickly recover from the financial impact of the coronavirus pandemic in the last two fiscal quarters of the year.
Turnover in grocery trade and pharmacies is projected to increase this year. Online grocery trade and home delivery services are also set to grow. As the coronavirus pandemic subsides, online grocery trade figures are expected to remain at a permanently higher level than they were prior to the pandemic. There will also be an increase in grocery trade employment, but this growth will not remain very permanent.
The disruption in customer flows will particularly impact specialty goods trade, such as fashion retailers, opticians, book stores, jeweller’s shops, department stores, and interior decoration stores. The sporting goods sector’s losses will be compounded by the less-than-ideal weather this winter season. The losses incurred by hardware stores may be magnified by the restrictions on movement to summer cottage regions during one of the year’s most important seasons for the sector. Even though some of the demand for household and specialty goods has moved online, the increase in digital trade will compensate only a small fraction of the demand lost to the pandemic. In addition, some of this digital demand may end up benefiting only foreign retailers.
“The situation is particularly challenging for specialty goods trade, and it is especially tricky for companies that have yet to develop an online presence,” Kurjenoja notes.
Consumers face increasing threat of unemployment
One of the most important indicators for the retail sector is the expectation of consumers that they will become unemployed. These expectations have trended negatively for the last two years, even while employment rates have improved. These figures plateaued for around six months at the tail-end of 2019, but then became markedly worse in March 2020. The previous time consumers reported experiencing this level of threat was in October 2016.
“This increased threat of unemployment generally causes people to increase their contingency savings, i.e. they begin saving their money for a rainy day, even when there may not be a need to do so. This is reflected especially in the trade of specialty and household goods,” Kurjenoja concludes.
Retail forecast Finland corona
For more details, please contact: Jaana Kurjenoja, Chief Economist, Finnish Commerce Federation, tel. +358 (0)40 820 5378, firstname.lastname@example.org