Retail sales in pre-festive season slump

Johannesburg - Growth in South Africa’s retail sales slowed to 6.8% year-on-year (y/y) at constant prices in November from a revised 7.5% in October, Statistics South Africa said on Wednesday.

On a month-on-month basis in November, retail sales contracted 0.3% and grew 7.3% in the three months to November compared with the same period a year ago.

Economists polled by Reuters this week expected retail sales growth to slow to 7.2% y/y from the 7.4% initially reported by the statistics agency for October.

The figure should influence the SA Reserve Bank (Sarb) to keep interest rates on hold, said Shireen Darmalingam, economist at Standard Bank.

“Today’s retail sales data, following this morning’s better-than-expected December CPI (consumer price index) print above the inflation target, is likely to sway the Sarb to keep interest rates unchanged at the conclusion of the first MPC (monetary policy committee) meeting tomorrow.

“While it is evident that consumers are still struggling, which does not bode well for GDP (gross domestic product) growth, the Sarb has maintained its commitment to keeping inflation within the official target."

Jeffrey Schultz, macro strategist at Absa Capital, said it was still a "relatively respectable figure".

"Retail sales are still growing at 13% as of November, which I think still reflects our long-held view that the consumer remains relatively alive and well in South Africa."

Retail sales have crept up and the consumption components of GDP are expected to continue being the primary drivers of growth, especially towards year-end when consumers increase spending for the holiday season.

Consumer spending boosted economic growth in the third quarter of 2011, with GDP growth rising to 1.4% in Q3 as demand-related sectors grew.

However, the high unemployment level at 25% of the labour force and near record high debt levels may constrain any robust sales growth.

The Sarb left the repo rate unchanged at 5.5% all of last year, after cutting rates by a cumulative 650 basis points between November 2008 and November 2010.