Johannesburg - Retail sales gathered momentum in May, growing at 4.5 percent year-on-year, up from a revised 1.6 percent in April.
In a note, Investec explains the net R1 a litre drop in the fuel price between August and April “provides a petrol price savings dividend which consumers are likely spending in the main, given the low level of household savings”.
However, the dividend is waning and will drop to 28c/litre by July, eroding the support to retail sales, Investec says.
Investec also adds the rand’s recent strength is unlikely to translate into widespread price reductions as retailers have contended with significant rand depreciation since 2012.
Retail price inflation is at 5.7 percent year-on-year, above its long-term average of 4.5 percent year-on-year, the bank says.
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Investec adds, there could be some relief in food price inflation, if not instances of deflation, should rand strength persist, bringing particular relief to the poor.
It notes Statistics SA calculates that food “makes up more than 40 percent [of] the poor’s overall expenses ... [o]ther large components ... are housing, alcohol and tobacco and transport... with ... [p]rice changes... [materially] affect[ing] ... living standards”.
It explains the rand strengthened in the past four weeks, but the effect of Britain’s leaving the European Union has still to filter through, although it is estimated to be small.
“The economy could just manage to avoid recession in the first half of this year, potentially recording a small fractional positive for the second quarter instead, and 0.2 percent year-on-year for the year as a whole.”
IOL