Recession forces Ecuadorians to reduce big ticket and discretionary spending; high-end restaurants are taking the biggest hit

Mar 15, 2016 | 4 comments

Ecuadorians are cutting back on spending, buying fewer big ticket items such as appliances and furniture. They are also cutting back on discretionary spending in such areas as dining, entertainment and travel.

The recession takes a toll on high-end restaurants.

The recession takes a toll on high-end restaurants.

Businesses taking the biggest hit, according to a new nationwide survey, are restaurants.

“Poor economic conditions and some government reforms have caused Ecuadorian consumers to be more cautious about their household spending,” according to a report by the Kantar Worldpanel consultants. “In addition to expensive consumer items, we are observing large spending reductions in such area as dining out.” It said.

According to Kantar, high-end restaurants are feeling the biggest impact from lower spending. In Quito, Kantar says these restaurants are experiencing a sales decline of 20% to 30% since late 2015.

“I believe some restaurants in Cuenca may go out of business, especially the more expensive ones,” says Cornelio Vintimilla, who owns five restaurants. “People are worried about the future and even if they have money, they prefer to save it,” he said.

Vintimilla adds that labor law requirements make it difficult for restaurants to adjust their budgets in hard economic times. He said he is hopeful that reforms currently being debated in the National Assembly will provide business owners with more flexibility.

Kantar reports that restaurants serving low cost, fixed-menu almuerzos are seeing little change in their business. “These lunches are seen more as a necessity,” the report said. “Some diners may look for cheaper alternatives but lunch-time restaurants are seeing sales maintain past levels.” Another bright spot, the report said, are sales of food in supermarkets and mercados, which have increased as more people eat at home.

Although the report did not provides numbers, it said that businesses that sell appliances and furniture saw a decline in sales in 2015. “Expensive purchases are being deferred by many households,” the report said.

Kantar says that 31% of households reduced their spending in 2015, with the trend accelerating at the end of the year.

 

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