Stats SA has released a better than expected figure for retail sales in May, showing year-on year growth of 6.2%. What can we read into this? ZA Confidential sought the views of some of our experts….
Chris Gilmour from Absa Investments:
Nobody out there got this one right! What is fascinating is that the updates from most of the JSE-listed retailers have, until very recently, been well ahead of retail sales growth, even allowing for the fact that the retail sales growth figure from Stats SA is a real figure i.e. after deducting inflation. But all of a sudden we are now seeing significantly more muted growth coming out of the listed retailers, as evidenced by the Massmart and Shoprite updates to end June that appeared recently. I suspect the best way to treat this May figure is as an aberration; a spike. June is likely to be significantly weaker and July should be weaker still, as the combined impact of the weaker rand, higher fuel and food prices as well as electricity and other administered tariff increases kick in. Stubbornly high unemployment will remain a factor, as will the gradual reduction in availability of unsecured credit.
Dennis Dykes from Nedbank:
The annual figure was much higher than even the most optimistic economist surveyed, and therefore will help to boost second quarter growth over the previous quarter’s very modest figure. The numbers have become very erratic. This figure comes after two very weak ones and should not be viewed as an underlying improvement in household spending but rather a ‘correction’ on earlier data. It will be interesting to see what next month’s release will hold. As far as sectors are concerned, there has been strong growth in the broader clothing category.
Christo Luüs from Third Circle Asset Management:
Real retail sales growth at 6.2% in May, was a welcome surprise. It was much higher than the consensus forecast, and the highest growth number in about nine months. However, higher fuel prices, and second round effects of these on inflation, will most likely make a repeat of such increases unlikely in the foreseeable future.
Conclusion:
A good figure. Maybe too good to be taken too seriously? Let’s see what happens in the coming months…..
Tweet of the Day:
Fake Dispatch (@Fake_Dispatch): The bottle of wine at home has no idea that it only has about one hour left to live.
ZA Confidential will soon become a paid subscription newsletter. Subscribe here
ZA Confidential 