Johannesburg – Retail figures released by Statistics SA (Stats SA) on Wednesday confirmed the retail sector is finally on the mend, economists said.
Stats SA said retail sales at constant prices rose to 4.6% year-on-year in May from a revised 2.6% growth figure in April. This surprised many economists, who had estimated growth of about 3.5%.
"The strong pick-up in retail activity during May was at least partially driven by the 2010 FIFA World Cup," said Stanlib economist Kevin Lings. "This implies that retail data for June and July will also be fairly robust."
Stats SA said major contributors to the May 2010 figures were household furniture, appliances and equipment which recorded 17.7% growth from last year, followed by retailers in pharmaceutical and medical goods, cosmetics and toiletries (11.3%) and retailers in textiles, clothing, footwear and leather goods (7.5%).
"The figures are much higher than expected, but not entirely surprising. One must remember that it took a while for retailers to move into positive territory," said Standard Bank senior economist Johan Botha.
The seasonally-adjusted figures show that retailers leapt into the black in January 2010 and have been on a steady rise, after spending most of 2009 in the doldrums while other sectors began showing recovery late in the year.
Economists also attributed the improvement to low interest rates, saying the trend should continue through to the second half, but at a much softer rate after World Cup sentiments have waned.
Lings, however, raised concern over sustained weakness in spending on hardware, paint and glass. The sector has been struggling for the past year off a high base established from 2004 to early 2008.
FNB Commercial economist Sizwe Nxedlana said the weak numbers in building supply material retailers reflected sluggish activity in the construction of new houses.
Nxedlana said while the figures reflected an improvement in consumer spending, not all fundamentals are in place for a cheerful year. He cited the stagnant labour market, high debt levels and limited credit extension plus higher electricity, water and health costs as well as pricier insurance, education, petrol and toll fees.
Nedbank economist Johannes Khosa said the economy was generally on the mend. However, downside risks to growth remained on the production side. Global economic sustainability looked increasingly doubtful, given continued structural problems in the US, severe fiscal adjustments in some European countries and attempts to cool growth in China.
"These concerns are likely to convince the Reserve Bank to keep interest rates on hold for as long as possible, with considerable downside risk to the interest rate outlook in the very short term," said Khosa.
- Fin24.com