Festive season shopping traffic for this year, which kicks off with Black Friday specials, is forecast to be on a slight upward swing after retail activity in September rose for the first time this year.
Consumers seem to have bitten the bullet on rising interest rates as demand for credit remained strong to supplement household incomes as the increase in real incomes slowed.
Data from Statistics South Africa (StatsSA) yesterday showed that retail sales rose by 0.9% in September from a year earlier, following a downwardly revised 0.3% decrease in August.
This was better than market forecasts of a 0.1% increase following nine consecutive months of declines.
StatsSA’s deputy director for distributive trade statistics, Raquel Floris, said the retail sales print in September was largely driven by increased sales of textiles, clothing, footwear and leather goods, and food, beverages and tobacco.
Floris said three of the seven retailer groups recorded positive gains.
“Retailers in textiles and clothing recorded sales growth of 13.5% year-on-year followed by food and beverages up 2.0%, and household goods at 0.3%,” Floris said.
“On the downside, four retail groups were weaker in September. This includes general dealers, as well as retailers in hardware painting, glass, pharmaceuticals, and cosmetics, and retailers classified in the miscellaneous group or other retailers.
“Hardware paints and glass recorded the largest decrease, declining by 5.5% year-on-year.”
On a month to month basis, seasonally adjusted retail trade sales increased by 0.1% in September, down from an upwardly revised 0.3% rise in August.
According to BankservAfrica, real incomes fell by 0.8% in September when compared to the same period last year, on the back of a lift in consumer inflation to 5.4%.
Investec economist Lara Hodes said consumers remained largely constrained despite September’s modest lift.
“While fuel price cuts in November and likely December should offer consumers some reprieve, interest rates are likely to remain elevated for longer, weighing on the indebted,” Hodes said.
“Moreover, while the unemployment rate improved somewhat in the third quarter, the expanded unemployment rate is still above 40.0%, evincing the extent of SA’s unemployment predicament.”
The data for September also concluded the results for the third quarter of the year.
Retail trade sales increased by 0.8% in the third quarter of 2023 from a decline of 0.8% in the second quarter, driven mainly by retailers in textiles and clothing and household goods.
This suggests that the retail industry was likely to contribute positively to the quarter’s headline gross domestic product (GDP) reading, in contrast with the productive sectors of the economy such as mining and manufacturing that dragged growth in the same period.
Indeed, the Bureau for Economic Research’s latest retail survey showed that the semi-durables retail category, which includes clothing and footwear, appeared to be continuing the growth trend that has emerged since the lifting of lockdown restrictions.
However, the year-to-date volumes are 1.5% lower than the same period last year, underscoring the challenging consumer backdrop.
FNB senior economist Siphamandla Mkhwanazi said credit data suggested that demand and supply for consumption credit, especially credit cards, remained strong, both in the bank and non-bank sectors.
In addition, Mkhwanazi said anecdotal evidence suggested that real wage growth might be turning marginally positive for the first time since the second half of 2021, largely due to slower inflation.
“If sustained, this could provide modest support to shopping activity in the near term, heading into Black Friday and the festive season,” Mkhwanazi said.
“However, our expectation of a further tightening in lending standards, as the cumulative impact of past interest rate decisions filters through, as well as depressed consumer sentiment should limit the upside.
“As such, we maintain our view of subdued growth in household consumption expenditure for the remainder of the year.”