Retail sales increased in real terms by 1.9% year-on-year in April 2013. It doesn’t look a particularly encouraging number, but what did our experts make of it?
Azar Jammine from Econometrix:
Year-on-year growth in retail sales at constant prices was slightly disappointing in April, coming in at 1.9%, down from 3.9% in February and 2.7% in March. Month -on-month seasonally adjusted growth was negative for the second successive month, at -0.6%. On a quarterly basis, growth in the three-month period February to April was 0.6% higher than in the preceding three-month period November to January, indicating annualised growth of around 2.5%. Nonetheless, it is dangerous to draw unduly pessimistic conclusions about the slowdown in consumer spending from these figures. This is because, unlike other industries such as manufacturing, mining and electricity production, retail sales are often affected positively by public holidays nowadays. Consumers frequently tend to use public holidays to go shopping. Accordingly, to the extent that there were fewer public holidays in April this year than in April last year, this may have dampened performance. Without doubt, the erosion of disposable income arising from increased inflation on the back of a lower Rand, coupled with a slowdown in the growth of unsecured lending and the reduction in the growth of the public service, are combining to drive down the growth in consumer spending. On the other hand, the maintenance of interest rates at extremely low levels is providing some support, thereby preventing a complete collapse. The outlook for the retail sector depends crucially on the extent to which the Rand’s weakness is sustained in such a way that forces the Reserve Bank to increase interest rates as opposed to enabling interest rates to remain unchanged over the remainder of the year. We favour the latter scenario as being more likely.
Nedbank economic unit:
Annual growth in retail sales slowed to 1.9 % in April from 2.7 % in March and substantially below market expectations of 3.5 %. On a monthly basis, seasonally-adjusted retail sales declined by 0.6 %. The trend in retail sales has been weak and will probably remain so in the months ahead. A combination of the poor economic outlook, weak consumer confidence, high inflation, which erodes consumer’s spending power, and the struggling job market will continue to contain consumer spending during the year.
Hein Kruger from Kruger International:
With the Rand on a slippery long term slope, causing a spiralling consumer inflation on top of a too high debt to expendable income ratio, at a time when interest rates can only rise in future from their current 40 year low, South African consumers are on the precipice of a fundamental recession. The latest retail figures underline in bold my statement at the frightening rate of the slowdown which can be roughly indicated as 50% down from the 3rd quarter to the last quarter last year, and a third down to the first quarter of this year.
Chris Gilmour from Absa Investments:
Retail sales growth, as measured on a year/year basis, rose by 1.9% in April from a revised 2.7% in Mar. This is a shade more than half of what we were anticipating and is thus extremely poor. It endorses the view – if such endorsement were necessary – that consumer spending is slowing considerably, due to increased pressure on consumers generally. But that’s not all; sales growth has now declined in three of the last four months, suggesting that momentum in spending is gradually decreasing. This is especially worrying for an economy where consumer spending accounts for 59% of GDP. With manufacturing in the doldrums (notwithstanding yesterday’s 7% bounce), one wonders where any growth is coming from in the SA economy.
With retail more rotten than rampant, today’s numbers do not do much to bring out a smile.