Retail sales data for February surprised on the upside yesterday, after dismal figures for January.
Statistics SA reported year-on-year growth of 3.8 percent, up from a revised 2.2 percent the previous month, with the main contribution coming from textiles, clothing, footwear and leather. The figures represent real growth – in other words, inflation has been stripped from the data.
On a month-on-month basis, retail sales in February grew 2.7 percent, after shrinking a revised 1.7 percent in January.
Consumption represents about 60 percent of the economy’s gross domestic product. And recent signs of weakness have been a serious cause for concern. The original January year-on-year estimates of 1.9 percent published last month prompted economists to revise down their growth expectations for the year.
Against this backdrop, an indication of a reversal should bring some cheer. However, the JSE general retailers index failed to react to the good news, giving up 0.5 percent to end the day at 62 176 points.
And economists reacted with caution.
FNB household and consumer sector strategist John Loos said the February figure was not the start of a rising trend and did not change his 2013 forecast of average retail sales growth of between 2 percent and 3 percent.
He noted that monthly data were volatile and a three-month moving average was a better reflection of short-term trends.
He said, on this basis, retail sales growth was only 2.7 percent in February, marginally higher than the 2.6 percent for the three months to January.
“Given many downward pressures on household disposable income growth of late, and taking note of recent negative consumer confidence numbers, I would say the 3.8 percent figure is unlikely to be sustained.”
Loos also said: “The perhaps surprisingly strong real retail sales growth over the past two to three years can be largely explained by a very strong real disposable income growth rate as certain normalisation took place after the big 2008 and 2009 recession shock.”
Nedbank’s economic unit had a similar view on the prospects for retail sales: “With the poor economic outlook and weak consumer confidence, we do not expect the strong rise in retail sales will be sustained throughout the year. Consumers are likely to be more cautious on spending.”
Standard Bank economist Shireen Darmalingam said retailers grew “increasingly pessimistic” about business conditions during the first quarter.
“The retail business confidence index, as compiled by the Bureau for Economic Research, declined by 4 points to 50 points.
“In other words, about half the retailers surveyed were not unsatisfied with the business environment.”
Absa Capital economist Peter Worthington pointed out the retail sales release did not include certain durable goods, such as cars, “where sales substantially backed off in February and March”; non-durable goods such as petrol; and services, which account for 43 percent of total household consumption expenditure.
“In fact, the retail sales survey only captures 35 percent of total household consumption expenditure.”
But he conceded: “However, there is no getting away from the fact that it was a good release, likely to cheer the Reserve Bank as it worries about its stagflationary dilemma.”