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Retail sales hit speed bump

May 17 2011 13:42 Reuters

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Johannesburg - Growth in South Africa’s retail sales slowed to 5.1% year-on-year (y/y) in March from a downwardly revised 5.5% in February, Statistics South Africa said on Tuesday.

Stats SA said retail sales grew by 5.6% in the three months to March, compared with the same period a year ago, also at constant prices.

A Reuters poll showed economists expected retail sales to increase by 5.2% on the same period a year before.

Eskom economist Mandla Maleka said the figure showed slower growth.

"Already in the horizon we’re beginning to pencil in the potential for interest rate hikes, and if we don’t get the momentum for retail sales, the recovery may be disturbed," he said.

“What’s encouraging is that it’s still remaining very positive. I think generally consumers are still heavily indebted, so the first thing that they will do is to try and consolidate their debt position where they can.

“Although the interest rate environment is still very favourable where we are ... consumers are still shy to accommodate new debt," he said.

Peter Attard Montalto, emerging market economist at Nomura, said the figure was disappointing and could have been influenced by continued high unemployment in the first quarter.

“Growth here should actually continue to decline in the coming months, which will be a further bearish sign. Retail sales combined with CPI (consumer price index) show that hawkishness in the market is misplaced at the moment and as such we continue to look for a rate hike in November and no earlier,” he said.

The y/y retail sales number has crept up in recent months as consumer demand improves, but credit data has shown households are still reluctant to borrow on concerns about the economic outlook.

The Reserve Bank bank said after its latest policy meeting last week that economic growth was improving, but not at levels that would have an impact on unemployment. It also said positive momentum in the past few quarters in household consumption growth appeared to have been sustained.
Retail sales have previously been a key driver for economic growth but fell sharply in 2009, during the country’s first recession in nearly two decades.


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