Towards More Measured Celebrations: Consumption Adjusts to Decreasing Purchasing Power

As inflation persists, the expanded VAT, and the absence of a 14th month salary, the festive season is expected to be more restrained. Households are prioritizing essentials, forcing businesses to rethink their sales strategies.

With the year-end festivities approaching, retailers are preparing for a more cautious season than usual. Typically, the festive period is associated with high consumption, but this year it unfolds in a less favorable economic context. Persistent inflation, the widening of VAT, and the lack of a 14th month salary are impacting household budgets. The outlook for commerce appears mixed, as businesses adapt their sales strategies to the moderate expectations of consumers.

According to recent data from Statistics Mauritius, the overall inflation rate for the 12 months ending in September 2025 was 3.4%, down from 3.8% for the same period the previous year. For the entire calendar year of 2025, inflation is projected to be around 3.8%, driven by sporadic increases in certain sectors.

The consumer price index (CPI) experienced a slight decrease of 0.3% between June and September, falling from 108.2 to 107.9 points. This change reflects a drop in prices of basic goods such as vegetables, powdered milk, cooking oil, and commercial rice. However, these decreases are offset by rising prices for vehicles, road taxes, and certain prepared dishes.

For households, this situation translates to an erosion of purchasing power. According to economist Sudesh Lallchand, this power primarily depends on the evolution of prices compared to wage growth. "The new regime has implemented measures that affect purchasing power. Allocations have been revised downwards, and there will be no 14th month this year," he explains. Even if some households may have slightly higher incomes, the continuous price increases diminish their actual spending capacity.

The elimination of the 14th month, which was paid in 2024, represents a significant loss for consumption. According to Sudesh Lallchand, about 60% of this bonus was directly spent, particularly on holiday-related purchases. "The lower the income, the more likely it is to spend the entire 14th month. Its absence is likely to weigh on domestic demand," he suggests. The economist predicts a decrease of around 5% in festive consumption compared to the previous year.

However, a potential trend towards moderation does not imply a total disinterest in festivities. Sudesh Lallchand reminds us that year-end spending retains a strong cultural significance. "In December, expenditures always exceed those of other months. Mauritians are keen to celebrate the festive period, even if their average spending is more limited," he notes. According to him, consumption will be divided among regular purchases, luxury items, and celebration-related expenses, but with an overall reduced volume.

In summary, the end of 2025 is shaping up to be a period of compromise. Consumers are expected to uphold holiday traditions, but within a tighter budget framework. Retailers, on the other hand, will need to balance attractiveness with caution in an economic landscape where every expense counts. While the festive season maintains its symbolic importance, it will translate this time into more sensible consumption, reflecting strained purchasing power and an uncertain economic climate.