Johannesburg - Driven by lower inflation and possible optimism about interest rate cuts, retail sales in January broke out of an eight-month losing streak to post an increase of 1.7% year-on-year.
But the official Statistics SA figures contrasted starkly with the findings of the Bureau for Economic Research's (BER) results of its retail sales survey for the first quarter of 2009, which suggested that overall sales volumes were still declining.
The BER said total sales volumes in the first quarter of this year had contracted at a faster rate than the fourth quarter of 2008. "The higher rates of shrinkage in volume of sales of semi-durable and durable goods overshadowed the modest recovery in the volume of sales of non-durable goods," the BER said.
The BER said that the sales of durable goods - such as furniture and appliances - plummeted further in the first quarter of 2009 after already contracting sharply during the final quarter of 2008. The bureau said the rebound in the volume of sales of semi-durable goods, such as clothing and footwear, in the fourth quarter of last year turned out to be a flash in the pan. During the first quarter of this year, these sales volumes contracted sharply once more.
Only the sales volumes of non-durable goods - mainly food - had increased, but remained weak compared with the heydays of 2005-2007.
But the market focused on the Statistics SA's figures, which were seen by some as a bright spot in an otherwise bleak picture of the SA economy. Still, other indicators of consumer demand tell a dismal story. New passenger vehicle sales fell more than 34% year-on-year in February 2009, slightly worse than January and the worst year-on-year contraction in 25 years. The decline for 2008 as a whole was 23%.
Stanlib economist Kevin Lings said one should be careful in interpreting the Stats SA retail sales number, as it was probably slightly overstated due to technical, statistical reasons.
Statistics SA used the consumer price index (CPI) to work out the "real" - that is, inflation-adjusted - number, and inflation had come down a lot. Lings said the drop in inflation had been mainly driven by the petrol price decline, but petrol wasn't included in retail sales, so it strictly speaking didn't make sense to use the CPI.
"I'm not saying that the actual retail sales figure is a fall of 3%, but the real increase of 1.7% is probably not exactly accurate either," he said.
Lings said the truth lay somewhere in between. It appeared that consumer spending was no longer collapsing, as had been feared in November. Christmas sales as reported by retailers had been encouraging. Nevertheless, the picture was still weak, and the Reserve Bank needed to cut interest rates and to frontload cuts. Lings expected the Bank to cut the repo rate by 100 basis points in April.
ETM economist George Glynos said the retail sales figures showed that there was a big difference developing between the local and external sectors of the economy.
Mining and manufacturing were bearing the brunt of the global crisis, while the local consumer was showing some resilience. The reasons why consumers were more resilient were optimism about interest rate cuts, as well as the fact that banks had tightened up on credit extension for big outlays such as houses.
The fact that people couldn't go out and buy an expensive house on credit was freeing up some cash for retail spending. Neverthless, he believed the first quarter gross domestic product (GDP) figures would confirm that the economy was in a technical recession. Glynos expected interest rate cuts of 100 basis points in April as well as in June, but said that interest rate cuts might not go as deep as many expected, because the inflation outlook was less rosy.
The category that retail sales fall in contributes about 14% to GDP. In the GDP data, the sector has shown negative growth for three quarters, although the last quarter's figure was a small 0.2% decline.
Overall GDP numbers, which saw GDP contracting 1.8% in the fourth quarter of last year, painted a dismal picture of the economy when the data was released at the end of last month.
This fuelled speculation that the Reserve Bank would convene an emergency meeting of the monetary policy committee meeting and cut the repo rate by 100 basis points. More recently, manufacturing data for January suggested that the carnage was continuing into this year, with production volume falling by 10.7% year-on-year and 4% month-on-month.
The latest Investec Purchasing Managers' Index showed there was no let-up in the woes of the manufacturing sector.
- Fin24.com