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Retail sales defy consumer pressures

Oct 18 2017 17:14
Lameez Omarjee

Johannesburg – Retail sales exceeded market expectations by far, accelerating by 5.5% year-on-year for August 2017.

The forecast was for a 2.7% year-on-year increase, said Investec economist Kamilla Kaplan.

The growth on a month-on-month basis was 2.4%, according to data released by Statistics South Africa (StatsSA) on Wednesday.

“This is the highest annual growth rate since May 2013, and didn’t come off a particularly low base,” said Jason Muscat, senior economic analyst at FNB. Retail sales are 1.5% higher than at the same point last year.

“It’s difficult to pinpoint where the impetus for the surge came given still relatively elevated consumer debt levels, high unemployment and muted credit growth,” he said.

Retailers may be offering “deep discounts” which would likely keep margins under pressure. Muscat said that the sector is expected to make a “healthy” contribution to the third quarter GDP.

It is also possible that retail sales were helped by the 25 bps interest rate rate cut in July and the slower inflation rate, said Kaplan.

The main contributors to the annual growth rate were “other” retailers, which were up 25.3% and contributed 2.7 percentage points to growth. This was followed by general dealers which were up 2.5% and contributed 1.1 percentage points to the growth.

Apart from the “other” retailers which reported the highest annual growth rate, others include retailers of household furniture, appliances and equipment up 9% and retailers in food, beverages, tobaccos and specialised scores up 5.7% over the past year.

All retail categories reported positive growth, said Muscat. Pharmaceutical outlets were up 3.6%, and clothing retailers up 2.5%. Hardware sales increased 2.7%.

Kaplan said that growth in consumer spending is still expected to be restrained. Further, the monetary policy easing cycle is likely to be shallow and the fiscal policy is expected to remain restrictive.

She added that a survey of retailers revealed that they expect “mediocre growth” in their trade volumes for the third and fourth quarter. 

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