Subdued retail sales figures released yesterday were indicative of potentially weak real growth in gross domestic product (GDP) this year, economists said yesterday.
Measured in real terms, retail trade sales increased 2.2 percent year on year in February, a sharp deceleration from a downwardly revised 6.4 percent in January.
The Statistics SA figures missed the growth of between 2.9 percent and 3.7 percent forecast by economists.
On a monthly basis, sales dropped by a seasonally adjusted 0.2 percent, but were up 3.6 percent year on year in the three months to February.
The main contributors to the rise in sales were retailers in textiles, clothing, footwear and leather goods, the Stats SA data showed.
Johannes Khosa of Nedbank’s economic unit said the annual figure was mainly dragged down by slower sales growth in the general dealer category, which eased to 1.1 percent year on year from 6.6 percent in January.
“Weak consumer confidence and pressure on household finances will contain consumer spending in the coming months,” Khosa said.
He added that it was anticipated that the Reserve Bank would tighten policy gradually by a cumulative 50 basis points over the next few months even though the underlying economic growth rate was still below potential.
Khosa said consumer spending was expected to be lacklustre in the months ahead as consumer confidence remained weak and household finances deteriorated.
Annabel Bishop, an economist at Investec, said retail sales growth was subdued and well below the consensus forecast of 3.8 percent.
However, it was in line with the deteriorating trend in real disposable income growth, depressed consumer confidence, a slowdown in credit extension to the private sector and higher interest rates.
“The subdued pace of February’s retail sales growth is indicative of the likely weak real GDP growth for this year. We have recently revised our economic growth forecast for 2014 down to 2.2 percent year on year, and down to 2.6 percent year on year for 2015,” Bishop said.
The slowing economy was attributable to a weakening of real growth in household consumption and the trend of escalated work stoppages due to electricity constraints and strike action.
She added that, should further interest rate hikes occur, this would increase the number of impairments and bankruptcies and raise unemployment levels in the private sector, and lower home ownership via defaults.