Retail trade figures surprise on the upside with 3.4% growth

Nompumelelo Magwaza

November retail sales figures, released by Statistics SA yesterday, beat market expectations and were evidence that the economy improved somewhat from the strike-inflicted lows of the third quarter, analysts said.

Retail sales rose 3.4 percent year on year at constant prices, up from 0.9 percent in October and better than the market forecast of 1.5 percent growth.

Major drivers of the increase were the textile, clothing, footwear and leatherwear sectors, which lifted sales by 8 percent, and household furniture, appliances and equipment with a 6.4 percent increase. Food, beverages and tobacco sales rose 5.9 percent.

However, sales in general dealers, and in the pharmaceuticals, medical and cosmetics goods categories, disappointed in November, falling 1.3 percent and 0.3 percent, respectively.

Overall sales increased by 0.9 percent on a seasonally adjusted month-on-month basis.

Johannes Khosa, an economist at Nedbank, said that the figures suggested that the economy was on the mend.

He said: “Today’s better-than-expected number provides further evidence that the economy improved slightly from the strike-inflicted lows of the third quarter. However, the pace of recovery remains slow and uneven, with activity under pressure due to recession in the euro zone and sluggish growth elsewhere in the world economy.”

Investec group economist Annabel Bishop said the sharp slowdown in retail sales in October had been of concern and could have prompted the Reserve Bank to cut interest rates at this month’s monetary policy committee (MPC) meeting if the figures had not improved in November.

While these numbers were not fantastic, household debt was on the rise, which meant that the central bank should be cautious in easing interest rates further as this would encourage additional credit usage, she said.

Close to 50 percent of South Africa’s 19.6 million credit active consumers are had impaired records at the end of September and this figure is likely to increase when the fourth quarter data is available.

Khosa said he believed that the MPC would keep monetary policy neutral until late this year or even early next year in order to balance weak growth prospects and rising inflationary pressures.

He added that retail sales were likely to remain relatively firm in December.

However, sales were likely to grow moderately during 2013 as weak consumer confidence, heightened worries about job security and high debt kept consumers cautious about spending on non-essential items. “High inflation will erode disposable income, offsetting some of the benefits of higher wage settlements.”