Retail sales subdued as consumers feel pinch

Cape Town - Retail sales increased marginally by 1.5% in April 2016 compared to the same period last year, Statistics South Africa’s most recent retail trade data showed.

Retailers in pharmaceutical products and medical goods, cosmetics and toiletries recorded the biggest increase of 8% year-on-year. In second place were hardware, paint and glass products, which climbed by 5.4%, followed by food, beverages and tobacco in specialised stores by 3.1%.

However, in the three months ended April 2016, retail trade sales fell by 0.5% in comparison with the previous three months.

Despite the marginal increase, business confidence is subdued. Just last week, the Rand Merchant Bank/Bureau for Economic Research’s business confidence index recorded a 32-point decline in the second quarter of this year. It was the lowest since the fourth quarter of 2009 when it dropped to 28.

At the same time, consumer spending is being weighed down by consumer debt, inflation and rising interest rates.

A recent survey conducted by Standard Bank showed that South Africa’s upper income groups spend 6.7% of their budgets on health, highlighting the fact that higher income earners are able to prioritise health.

Poorer households on the other hand spend up to 34% of their income on food, which makes them vulnerable to food inflation.