Retail sales spurt ‘a correction, not a trend’

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The sharp growth in retail sales in November last year was unlikely to represent a new trend in consumer spending as the economic challenges for households remained the same, economists warned yesterday.

The pick-up in retail trade sales growth, which accelerated to 4.2 percent year on year in November from 1.4 percent in October, surpassed the market consensus forecast of 1 percent to 1.2 percent growth.

Economists said the bigger-than-expected gains could be attributed to a recovery from the strike-inflicted months of September and October last year.

The retail trade data released by Statistics SA yesterday show that the growth spurt was driven by high sales in the general dealers category, which contributed 2.6 percentage points to the headline figure as sales rose by 7.1 percent at constant prices. Textile, clothing and footwear retailers contributed 2 percentage points with sales in this category increasing by 9 percent.

Sales increased by a seasonally adjusted 1.2 percent month on month in November. For the three months to November, retail trade sales increased by 2 percent from a year earlier, with the main contributors being retailers in textile, clothing, footwear and leather goods.

In contrast, retailers of food, beverages and tobacco saw continued weakness, as sales fell by 0.8 percent year on year in November. It was an even worse month for stores selling household furniture, appliances and equipment, which experienced a further 6.2 percent slump in sales.

“The rebound in sales over the month could mainly be attributed to a recovery following strikes in some key sectors in September and October,” the Nedbank Economic Unit said yesterday.

Johannes Khosa, an economist at Nedbank, said the overall growth rate was unlikely to represent a new trend in consumer spending. “General economic conditions remain challenging and the financial status of households is unlikely to improve significantly in the short term,” he said.

The general trend in consumer spending patterns would remain moderate, constrained by a wide range of factors including weak and fragile consumer confidence. This came as a result of the weak job market, high existing debt levels and tight credit lending standards, as well as rising inflation.

Khosa said higher inflation would erode disposable income and partly offset the benefits of higher wage settlements.

Kamilla Kaplan, an economist at Investec, said despite the outcome in November, retail sales growth underperformed last year relative to 2012. “For the first 11 months of the year, retail sales registered growth of 2.7 percent compared with the same period in 2012 where retail sales growth was 5 percent.”

She said the latest retail sales growth performance merely reflected a correction, as workers returned to work and again received an income, following strike action in a number of industries in prior months.

Of the main retail categories, data for the year so far showed only textiles, clothing and footwear sales recorded a marginal increase in growth, to 7.6 percent from 7.3 percent in the same period of 2012.

“This is reflective of the weakening nature of household consumption growth. Consumer activity has been impeded by depressed consumer confidence, the higher cost of living and the slowing rate of growth in credit extension to households.”



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