Retail sales up 6.4% in August

2012-10-17 14:32

Johannesburg - Growth in SA's retail sales quickened to 6.4% year-on-year in August compared with a revised 2.9% in July, Statistics South Africa said on Wednesday.

On a month-on-month basis sales were up by 2% in August and rose by 6% in the three months to August compared with the same period a year ago.

Economists in a Reuters survey expected retail sales growth of 4.6% in August.

“One shouldn’t overlook the downward revision that occurred in the prior month, so month-on-month growth wasn’t really that strong if you take out that downward revision.

“We expected it (retail sales growth) to be stronger given the fact that we had that rate cut in late July, which would have contributed more money in people’s pockets to spend.

“Retail sales growth is quite volatile and is not that much up from last month so it won’t be changing any interest rate views in particular. Our interest rate view is that interest rates are going to stay unchanged until the end of 2014 and this data only supports that view,” said Ilke van Zyl, economist at Absa Capital.

Said Thabi Leoka, senior Standbank Bank:  “We said in the week that even though the number may seem promising - we forecast 5.9% - it is not necessarily an indication of household consumption.

“Looking at it that way we expect household consumption expenditure to slow, and we expect spending on durable goods to slow as well.

“It is also leading up to the Christmas season, we are likely to see a firmer number, but that doesn’t necessarily indicate consumer sentiment.

“If you also look at confidence index surveys, they are still in negative territory, implying that consumers still don’t have a positive outlook on the domestic front.”

Dennis Dykes, chief economist at Nedbank said: “These numbers have been very volatile. It’s difficult to draw strong conclusions, but (the data) is a bit stronger than expected.

“We think that on balance over time, it’s going to settle to a slightly weaker range. Disposable income is likely to be under some pressure, because of higher inflation and employment not rising very much.

“Consequently we would expect consumer spending to come into this 4-5% type of area.”

Anisha Arora, emerging market analyst added: “South African retail sales have positively surprised in August, rebounding to 6.4% year-on-year following last moths disappointing and now further downwardly revised figure at 2.9%.

“Further ahead, the recent mining strikes over demands for higher wages which spread to manufacturing and the service sectors could weigh on retail trade, especially given increased job losses and dampened confidence. However this may be offset by higher wages above the rate of inflation.”

Market reaction

The rand firmed to R8.6550 against the dollar at 11:39 GMT from R8.695 before the data was released at 11:00 GMT.

The yield on the benchmark 2015 bond was steady at 5.38%.

Sales growth undershot market expectations last month, coming in at 4.2% (later revised to 2.9%) compared to a market forecast of 7.1%.

Statistics South Africa said the data had been drawn from a fresh 2012 sample, replacing the previous year’s sample.

Retail sales averaged 5.9% last year, compared with 5.1% in 2010. Analysts expect sales will slow this year as higher fuel and food costs curb non-essential spending.

Consumer spending underpinned economic growth in the last half of 2011 as demand sectors grew.