Johannesburg - The acceleration of inflation to the highest level in nine months and the drop of retail sales to their lowest level in more than two years will have heightened the concerns held by Finance Minister Pravin Gordhan and the SA Reserve Bank about the health of the economy.
Headline consumer inflation accelerated to an annualised 6.6 percent as expected in November from 6.4 percent in October, data from Statistics South Africa (StatsSA) showed on Wednesday, boosted by increasing food and transport prices.
Retail sales unexpectedly fell for the first time this year in October, suggesting that the Reserve Bank might continue to hold off raising interest rates in January to take pressure off the economy.
StatsSA said retail sales were down 0.2 percent year-on-year in October, following a revised increase of 1.6 percent in September.
Prices of food and non-alcoholic beverages, which comprise 15.4 percent of the consumer price index, climbed 11.6 percent from a year earlier, while fuel costs rose 5.6 percent.
The Reserve Bank last month left interest rates unchanged for a fourth straight meeting this year, even as it warned that risks to inflation may force it to reassess its call that the policy tightening cycle is near an end. It said inflation will peak at 6.6 percent in this quarter, then slow to 5.8 percent next year and 5.5 percent in 2018.
The bank has hiked the benchmark repo by a total of 200 basis points since early 2014, but has kept it unchanged at 7 percent since the last increase in March as economic growth, traditionally been driven by consumer demand, remains weak.
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Yesterday, StatsSA said retail sales were down 0.2 percent year-on-year in October following a revised increase of 1.6 percent in September.
On a month-on-month basis, sales fell by 0.7 percent, but ticked up 0.5 percent in the three months to October compared with the same period last year.
Dennis de Jong, managing director at UFX.com, said the retail sector appeared to have fallen to its knees, and the economy’s current state made it hard to see sales rebounding any time soon.
He said retail sales falling to their lowest levels in more than two years would have heightened the concerns held by Gordhan about the health of the economy.
“Consumer confidence has eroded in the face of rising inflation, interest rates and an uncertain political situation." -
- Additional reporting by Bloomberg and Reuters