Retail sales take a knock

Johannesburg - South Africa's retail sales fell by 5.1% year-on-year in September at constant prices, compared with a revised 6.5% decline in August, Statistics South Africa said on Wednesday.

Stats SA said retail sales decreased by 5.2% in the three months to September, compared to the same period a year ago, also at constant prices. Economists polled by Reuters forecast a 4.4% year-on-year fall in retail sales for September.

An economist at Efficient Group, Freddie Mitchell, said: "We're glad to see the pace of contraction in the retail sales slowing down. It's getting better, but there's still some work to be done to get into the positive side."

South African retail sales had fallen over the past year after a number of years of strong growth that helped lift expansion in the overall economy to around 5%.

Retail sales are expected to stay under pressure in 2009 due to job losses and South Africa's first recession since 1992.

Sales have partly been hit by the lagged effect of 500 basis points' worth of interest rate increases between June 2006 and June 2008 as the central bank sought to rein in inflation.

The Reserve Bank cut rates by 500 basis points between December last year and August to help the economy.

The central bank however left rates unchanged on Tuesday, on signs the economy is on course to exit recession and worries that high power price rises will feed price pressures.

The rand was trading at 7.4277 against the dollar at 09:38 GMT, from 7.43 just before the data was released at 09:30 GMT. The yield on the 2015 bond was at 8.38% from 8.385%.

- Reuters