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Lower-than-expected hike in March retail sales

RETAIL activity in South Africa is expected to moderate in the months to come after rising less than expected in April as consumer prices remained elevated on geopolitical tension and supply-chain disruptions. File photo.

RETAIL activity in South Africa is expected to moderate in the months to come after rising less than expected in April as consumer prices remained elevated on geopolitical tension and supply-chain disruptions. File photo.

Published May 19, 2022

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RETAIL activity in South Africa is expected to moderate in the months to come after rising less than expected in April as consumer prices remained elevated on geopolitical tension and supply-chain disruptions.

Data from Statistics South Africa (Stats SA) yesterday revealed that retail trade sales rose by 1.3 percent in March compared to the same month last year.

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This was slightly lower than the market’s forecast of 1.5 percent following a 0.9 percent contraction in February.

Investec economist Lara Hodes said March’s modest reading evinces the financial pressure many households were still facing in the current economic environment.

“Elevated administered and food prices continue to dilute disposable incomes while unemployment remains at critically high levels,” Hodes said.

“Overall consumer confidence remains depressed with concerns over the economic outlook and households’ financial position. An expected higher interest rate and cost environment is clearly suppressing sentiment.”

Stats SA said six of the seven categories recorded annual expansion, but the highest contributor was ‘general dealers’, which rose by 1.9 percent in March.

It said there were also notable gains recorded by retailers in pharmaceuticals and medical goods, cosmetics and toiletries, household furniture, appliances and equipment.

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Stats SA’s deputy director for distributive trade statistics, Raquel Floris, said the value of sales recorded by retailers in pharmaceuticals and medical goods and cosmetics increased by 6.2 percent year-on-year.

On the downside, Floris said that sales in the hardware, paint and glass decreased by 12.4 percent year-on-year, in line with the waning home-improvement drive.

“The statistical release for March also provides an overview for the first quarter of 2022,” Floris said.

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“Gross and seasonally adjusted retail trade sales were positive in the first quarter, increasing by 1.9 percent compared to the fourth quarter of 2021.”

On a monthly basis, retail trade fell by 0.3 percent in March, following an upwardly revised 2 percent decline in February.

Nedbank economist Johannes Khosa said the retail sales figures suggested that consumer spending will make a positive contribution to economic growth in the first quarter.

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“However, the impact of the flood experienced in KZN in April and the rising cost of living will partly contain spending growth,” Khosa said.

FNB senior economist Siphamandla Mkhwanazi concurred that higher inflation, especially food, transportation, and utility costs, depressed consumer sentiment.

“We expect the momentum in volume sales to continue slowing in the coming months, as consumer headwinds intensify,” MKhwanazi said.

“The slight lift in credit uptake should provide marginal support but not enough to counteract these headwinds.”

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