Johannesburg - Retail sales growth practically stalled in September, lowering expectations for third-quarter gross domestic product growth.
Statistics SA data released yesterday showed retail sales growth in real terms slowed to 0.2 percent year on year in September, far undershooting market expectations of 2.4 percent.
Textiles, clothing, footwear and leather goods continued a rally as the biggest contributor to the increase in retail sales with a 5.9 percent gain. The hardware, paint and glass category was next best with a 3.4 percent increase.
For the third quarter as a whole retail sales lifted 0.4 percent quarter on quarter, and grew 2.4 percent compared with the same quarter last year.
Consumer confidence dropped to a 10-year low in the third quarter due to the pullback in the extension of credit, numerous strikes and the rising cost of living, according to an FNB-sponsored index.
Credit retailers such as Lewis, Truworths and Foschini reported weak sales growth as a result of their exposure to the weaker credit environment.
Investec economist Kamilla Kaplan said the automotive sector strike could have affected the weak figure and this might rebound in the October sales figures. She said: “Such month-to-month volatility should not detract from the slowing bias in the underlying sales growth momentum.”
Kaplan said there was nothing to suggest consumer demand would strengthen as household finances were under strain, growth in credit provision was slow and consumer confidence was at a decade low in the third quarter.
Nedbank noted: “Households are likely to remain cautious of spending on non-essential items in the months ahead given the current unfavourable economic conditions.”
Stanlib chief economist Kevin Lings said the sharp decline in retail sales growth indicated the consumer was under increasing strain as the festive season edged closer.
He said the retail sales data were better looked at on a trend basis, which showed that “consumer spending has been losing momentum for some time and is expected to remain under pressure over the coming months. This largely reflects a moderation in income growth, a sharp slowdown in the growth of unsecured credit, a lack of job creation, falling consumer confidence, and a rise in the cost of living, including the cost of petrol (which is not part of the retail sales data), electricity and education.”
Vunani Securities economist Ilke Van Zyl said the weak figure worsened the Reserve Bank’s policy “dilemma” as higher interest rates would hurt the consumer further, but were necessary to stave off a mounting risk to the inflation outlook. - Business Report