Worrying Retail Numbers

Annual growth in retail sales slumped to 0.2 % in September from 3.2 % in October, well below the consensus forecast of 2.5 %. On the face of it, this is very worrying, but what do our experts make of it?

Nedbank Economic Unit:
Households are likely to remain cautious of spending on non-essential items in the months ahead, given the current unfavourable economic conditions. Today’s numbers provide further evidence that economic growth slowed in the third quarter. We anticipate that the Reserve Bank will maintain its accommodative monetary policy stance well into 2014.

Azar Jammine from Ecometrix:
The strength of the retail sales growth in August had surprised on the upside. At the time, one had suggested that there were factors which had been providing support for retail sales in past months. Firstly, interest rates have remained at current 40-year lows for a prolonged period. Secondly, the continuing growth of the so-called black middle-class has also prevented the growth in consumer spending from declining more sharply. Although this is still small as a percentage of the total population, its growth has been continuing to make a major contribution to overall consumer spending. Finally, the downturn in consumer spending, particularly in respect of durable goods, during the recession of 2009 was so severe, that in certain instances there is still a catch-up replacement demand. Disappointingly, however, the release of the September retail sales data show that y-o-y growth declined sharply to 0.2% in September, from an upwardly revised 3.2% in August (previously reported as 3.0%). This was much lower than consensus forecasts of 2.5% as well as our own forecast, of 2.3%. The September growth in retail sales was also lower than the average growth rate recorded for the first nine months of the year, of 2.7%. M-o-m seasonally growth in retail sales was severely depressed, at -0.7%. Contributing towards the decline in retail sales in September was the fact that rising inflation more generally on the back of the depreciation of the rand exchange rate over the past year has been eroding growth in disposable income. Secondly, interest rates have not declined for a long while. Thirdly, growth in unsecured lending to households has slowed sharply in recent months. Fourthly, signs are beginning to emerge suggesting households are coming under increased financial pressure as consumers are perceived to be carrying high levels of debt and are seeing big increases in their impairments. Finally, growth in public sector employment, which had been a driver of consumer spending, is coming under pressure. It is also conceivable that the effects of widespread strike activity and the resultant loss of pay for striking workers in September had a negative effect on the growth in consumer spending in the month.

The Efficient Group’s Dawie Roodt:
This is a bit of a bummer! It probably means that GDP growth will be closer to 1.5% than to 2%. And, all ratios to GDP (like the fiscal deficit, debt etc.) are all going to go south. This is not good.

Comment:
With very un-festive Christmas trees adorning the malls in the African sun, and mince pies being added to Woolworths’ year-round offering of hot cross buns, one feels for the retailers who must be hoping for a bit of a catch up over the Holy season. However, instinct tells me that Scrooge may win over Santa in Xmas 2013, as retail remains in a rut.

Tweets of the Day:
Puns (@omgthatspunny): Police were called to a day care where a three-year-old was resisting a rest.
Puns (@omgthatspunny): If towels could tell jokes they would probably have a dry sense of humor.
Sea Tea (@Tierno158): When I accused my girlfriend of using too much Botox she just sat there with a frozen expression on her face.
Funny Tweets (@iQuoteComedy): To do list- (1). Go to pet store. (2). Buy bird seeds. (3). Ask how long it will take for the birds to grow. (4). Watch the reaction

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