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Johannesburg - South Africa's retail sales fell by 6.7% year-on-year in June, official data showed on Wednesday, showing demand depressed by a recession that has resulted in job losses across Africa's biggest economy.
The data lends weight to the argument for more interest rate cuts this year, although the majority of analysts polled by Reuters last week expect the central bank to leave the key repo rate unchanged at 7.5% when it concludes its latest policy meeting on Thursday.
Retail sales contracted by a revised 4.4% year-on-year in May. They were down 6.0% in the three months to June, compared to the same period a year ago, also at constant prices.
The figures come in the wake of data showing manufacturing shrank sharply in June, firming expectations that the economy, which fell into its first recession since 1992 in the first quarter of this year, will register a third consecutive contraction in Q2.
"I think this confirms that the second quarter was another negative quarter in terms of consumer spending," said Citadel economist Dave Mohr. "The South African economy was still in recession and GDP probably fell further."
Sales have partly been hit by 500 basis points' worth of interest rate hikes between June 2006 and June 2008 as the central bank sought to rein in inflation.
The Reserve Bank started cutting interest rates in December and has since reduced rates by 450 basis points to help the economy, mired in its first recession in nearly two decades.
Inflation a concern
The central bank, however, left rates on hold in June, citing inflation concerns, and 23 out of 26 economists polled by Reuters last week expect rates to stay on hold again this month.
However, 12 analysts saw a chance of another cut before the end of the year.
Central bank Governor Tito Mboweni is due to announce the decision of the monetary policy committee from around 15:00.
Some analysts said the retail sales data might just help tilt Thursday's decision in favour of a rate cut.
"The Reserve Bank is going to have to respond to these numbers and cut rates tomorrow," said Brait economist Colen Garrow.
- Reuters