Johannesburg - Growth in South Africa's retail sales quickened to 3.4 percent year-on-year in November compared with a revised 0.9 percent expansion in October, Statistics South Africa said on Wednesday.
On a month-on-month basis, sales were up by 0.9 percent in November, and increased by 3 percent in the three months to November compared with the same period a year ago.
Economists in a Reuters survey expected retail sales growth of 1.5 percent in November.
ANALYST COMMENT
ANNABEL BISHOP, GROUP ECONOMIST, INVESTEC
“Retail sales growth is key given it is an important component of household consumption expenditure, which constitutes around two thirds of economic activity, or GDP.
“Fixed investment, government and private sector spending have supported the South African economy in an environment of weak and deteriorating global demand, but the sharp slowdown in retail sales in October was of concern and could have prompted the SARB (South African Reserve Bank) to cut interest rates at its January monetary policy committee (MPC) meeting if retail sales growth had not improved in November.”
“While 3.4 percent year-on-year growth is not heady, household debt is rising, which means that the SARB should be cautious in easing interest rates further as this would encourage additional credit usage.
“While we expect no interest rate cuts next year, the SARB may decide to trim rates, possibly by 25 basis points in March 2013 if retail sales growth dips in December (not our expectation) and in January. With the repo rate at 5.0 percent a 50 basis point cut would have had an excessive impact.”
DAVE MOHR, ECONOMIST, CITADEL
“It's encouraging that we at least saw some monthly improvement because the previous two months, there were declines in the levels of spending on a month on month basis.
“If you look on the year on year behaviour in the course of the year, there was a definite slowdown in real retail spending during 2012 and this is probably a trend that will be sustained during 2013 although we don't think that real retail sales will go negative.”
NEDBANK ECONOMIC UNIT
“Retail sales are likely to remain relatively firm in December. However, sales are likely to remain moderate during 2013 as weak consumer confidence, heightened worries about job security and high debt make consumers more cautious about spending on non-essential items.
High inflation will also erode disposable income, offsetting some of the benefits of higher wage settlements. Today's better than expected number provide further evidence that the economy probably improved slightly from the strike-inflicted lows of the third quarter.
“However, the pace of the recovery remains slow and uneven, with production under pressure due to a recession in the euro zone and sluggish growth elsewhere in the world economy.
“We believe that the MPC (monetary policy committee) will keep monetary policy neutral until late this year or even early 2014 in order to balance weak growth prospects and rising inflationary pressures.”
MERINA WILLEMSE, ECONOMIST, EFFICIENT GROUP
“Once again retail sales surprised us on the upside. Where this demand is coming from is still a little bit of a mystery.
“What we can say is that the current low interest rate environment is definitely boosting the local consumer to spend even in these tough times.”
PETER ATTARD MONTALTO, EMERGING MARKET ECONOMIST, NOMURA
“Retail sales show a pretty good growth rate in November. Following the manufacturing numbers this does seem to indicate a slight bounce into year-end but as we have said before we still think such a bounce is not sustainable into Q1, as PMI seems to indicate.”
MARKET REACTION
The rand initially weakened slightly against the dollar but came back to 8.8210 against the dollar by 13:46 SA time from 8.8250 before the data was released at 14:00 SA time.
The yield on the 2026 benchmark bond dipped to 7.17 percent from 7.19 percent prior to the release while that for the shorter-dated 2015 issue fell to 5.33 percent from 5.355 percent.
BACKGROUND
- Latest data shows retail sales averaged 5.9 percent last year, compared with 5.1 percent in 2010. Analysts expect sales growth to slow further this year as higher fuel and food costs curb non-essential spending. - Reuters