Johannesburg - Growth in retail sales slowed to 0.8 percent year-on-year in July after expanding by a revised 1.4 percent in June.
This is according to data released Wednesday by Statistics SA.
Analysts polled by Reuters had forecast a 2 percent year-on-year increase in July.
On a month-on-month basis, sales fell 0.4 percent, and were up 2 percent in the quarter to July compared with the same period last year.
Investec says in a note the figure shows significantly weak real growth at the start of the third quarter, but could improve thanks to substantial petrol price cuts in August and September.
The banks adds the historic average for real retail sales growth is 5 percent year-on-year in SA, while real growth topped 14 percent in boom times. “”So South Africa’s 0.8 percent year-on-year of today is particularly weak in comparison, as is June’s revised 1.4 percent year-on-year,”Investec says.
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Paul Sirani, chief market analyst at Xtrade, says, “with reports stating that consumers in South Africa are under immense financial strain and burdened by debt, it’s little surprise to see that June’s slowdown in retail sales has been followed by another set of disappointing figures for July.
Investec notes households experienced a ratio of debt to their disposable income of 75.1 percent in the second quarter, down from 75.1 percent in the first quarter, while this figure was 76.3 percent in 2006.
“From 2002 households began to ramp up debt, to a peak of above 85 percent in 2008, and it appears the deleveraging trend from this peak is not yet over. Debt is still being incurred, but at a lesser pace, while real disposable income growth is weak.”
In addition, notes Investec, as the prime rate has increased, so the cost of servicing household debt has grown, from 9.7 percent of disposable income in the first quarter to 9.8 percent of disposable income in the second.
Investec adds sales of durable goods, such as fridges, are especially affected by a slowdown in sales.
Sirani notes it “appears that the likelihood of a technical recession in the second quarter of 2016 isn’t entirely out of the question and Finance Minister Pravin Gordhan will know the coming months are going to be very challenging.
“Gordhan has plenty on his mind, not least the allegations of impropriety among members of the Financial and Fiscal Commission which could well be destabilising the government and breeding uncertainty in the South African economy at the moment. Figures for August and September, set to be released in the coming months, will be watched with great interest.”