You probably have had enough red meat from Eid ul Azha, celebrated a few weeks ago. It’s time to digest and dig some spending patterns. Some print media analyses that came right after Eid suggested that spending on Eid wasn’t much this year, which goes against the anecdotal evidence; plus, there were no numbers to back such analyses.
Over the years, BR Research has been taking currency in circulation trend close to Eid as a close proxy to study the spending patterns. Since nearly all of the Eid related expenditure - be it of buying animals or paying the butcher - is done via cash, the flow of currency in circulation just before Eid can be taken to reflect the spending by masses on the sacrifice and the festivity. The lacuna in analyzing Eid spending is that the expenditure is not really recorded formally. And hence, we have to rely on proxies and guesstimate, which have their own restrictions.
Nonetheless, let’s dig into the numbers. Assuming Eid spending to be a factor of currency in circulation (CIC) flows three weeks prior to the festival and analysing trends for the past seven years, it can be seen that the spending from FY12-FY15 hovered between 0.59- 0.62 percent of GDP; the absolute growth was in double digits in FY15, and a decent growth till last year. FY17 (2016 Eid) touted the highest spending in absolute terms (Rs225 billion) as well as in year on year growth.
Prior to that, there was a trend of higher formation of CIC (FY15-16), which somewhat slowed down in FY17, making it more compelling to believe that households in Pakistan sacrificed with open hearts last year. However, spending tapered off this year (FY18) as it declined by 21 percent; in terms of GDP, it was too low relative to all the other years analysed here.
Why so? The economy is growing faster than what it was last year. Home remittances figures also suggest that people sent home bigger sums of money close to Eid this year. What then explains this contrast? Well, it’s hard to pin point as the analysis may not truly reflect the actual spending, but some factors can be narrated to support the spending trend based on CIC.
A) The weather close to Eid was not conducive for the animal markets, especially in Karachi; this could explain lower transactions of animals taking place this year. B) More people might have outsourced the sacrifice to formal meat shops, and they might have used credit/debit cards for payments C) A much more plausible reason could be the behaviour of asset markets and low political/economic confidence near Eid.
Last year, when Eid spending was seen to be highest, the stock market was booming; Nawaz regime looked untouchable; and people were making good returns on real estate investments. On the flipside, the markets this year were down amid political uncertainty; and it might be the case that the households were protecting their savings for the rainy days. If we are correct, let’s hope that the confidence is restored and the trend normalizes next year. Nonetheless, it’s good to eat less meat and keep an eye on your cholesterol levels!
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