Retail sales still limping, but confidence improves

Comment on this story
BR_br builders0 Independent Newspapers A Builders Warehouse outlet. Unlike struggling furniture retailers, hardware, paint and glass retailers reported robust growth last year as residential building activity increased. Photo: Simphiwe Mbokazi

Johannesburg - The drop in retail sales growth since the second half of 2012 can be ascribed to a dramatic slowdown in unsecured credit extension, waning real disposable income growth and high unemployment figures, according to an Ernst & Young and Bureau for Economic Research quarterly survey released yesterday.

The survey showed that retail sales growth remained fairly weak during the second quarter. According to Statistics SA, retail trade sales grew by an average annual rate of only 3.2 percent year on year between January and March, down from 6.1 percent in 2011 and 4.7 percent in 2012.

The survey points to retail sales growth of between 2 percent and 3 percent during the second quarter.

Derek Engelbrecht, who leads the retail and consumer products practice at Ernst & Young, said the dip in sales was due to the slowdown in unsecured credit extension, declining disposable income on the back of weak growth in jobs and rising inflation.

Consumer inflation shot up to 6.6 percent last month from 6.1 percent in April, the highest in almost five years.

Engelbrecht said although trading conditions remained very challenging during the second quarter, the situation could have been worse given the overall economic effect of the prolonged mining strike and the ever-present electricity shortage. Rather than a further substantial deterioration in retail sales growth in the second quarter, the survey pointed to another quarter of modest growth in retail sales.

The survey added that business confidence levels of retailers recovered from 39 to 49 index points during the second quarter, suggesting that half of the retailers surveyed were satisfied with prevailing business conditions in the trade sector.

But household goods and furniture retailers were likely to experience more strain.

“Given the sensitivity of the demand for durable goods to the availability of credit, it is not surprising that retailers of household appliances suffered the largest slowdown in sales growth over the past two years, Engelbrecht said.

Despite this, most retailers expected a slight improvement in sales of furniture and appliances during the third quarter of this year, compared with the weak levels recorded last year.

In contrast to furniture retailers, hardware, paint and glass retailers reported robust growth last year, supported by an increase in activity in residential building.

Clothing and footwear retailers were the only other stores to report sustained strong growth in sales volumes during 2013 and in the first quarter of this year.

Growth in sales of non-durable goods such as food, beverages and tobacco declined over the past year.

“To be sure, the growth in non-durable goods sales volumes remained sub-par during the second quarter. However, most retailers reported that their sales volumes beat their earlier projections and that they anticipated a slight improvement in the next quarter,” Engelbrecht said.


sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.