Consumers avoid spending

Johannesburg - Retail sales weakened further as the current economic climate put the brakes on consumer spending, according to data released on Wednesday.

Statistics SA said April's retail sales dropped an annual 6.7% compared with a revised 4.9% decline in March.

The data clearly illustrated that South Africa's economy was struggling to support the retail sector.

South Africa has now entered its first recession in 17 years and household's unhealthy finances combined with job losses and concerns about job security are weighing heavily on consumers.

"We believe that job losses tend to hit consumer spending with a lag," said Nedbank economist Nicky Weimar.

"Some 208 000 jobs were lost in the first quarter of this year and we see more being lost," she added.

Weimar said April's retail sales figure was partly due to the fact that the Easter holidays fell in April this year and this was bound to have had a negative impact on overall sales.

She added that very weak demand in April was another factor to be taken into account.

South Africa's economists are hoping that retail sales will start to stabilise towards the end of the year as lower interest rates work their way through the country's economy.

"In the final quarter of the year it's possible that we'll see retail sales in positive territory... but there are a lot of unknowns out there for the consumer," Weimar said.

"If Eskom gets its 34% tariff hike and if oil prices hover around $70 per barrel then consumers will not only be worried about their jobs but they'll be very worried about their ability to afford items," she added.

"When interest rate cut benefits filtered through to the consumer, Weimar believed that this would not immediately lift spending.

"The consumer will probably do one of two things: pay off debt or save," she said.

"The consumer is not out of the woods yet and therefore retailers aren't either," Weimar concluded.

- Sapa