Retail sales fall below market expectations, dragged by weakening growth
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JOHANNESBURG – Retail sales moderated to 1.1 percent year on year in August, following a 2 percent increase in July, falling below the market consensus of 1.7 percent.
Data from Statistics South Africa (StatsSA) on Wednesday showed household furniture, appliances and equipment recorded the largest annual growth rates at 4.5 percent and all "other" retailers at 3.8 percent.
StatsSA said the print reading was, however, dragged down by weakening growth in all other categories, including the textiles and clothing segment and the pharmaceutical and medical goods grouping.
Senior FNB economist for property and consumer Economics, Siphamandla Mkhwanazi, said the year-to-date retail sales growth continued to depict a muted demand environment.
“This is reflected in the persistently low retail inflation readings, which remain below consumer price inflation levels, averaging just 2.4 percent year-to-date,” Mkhwanazi said.
“This demonstrates retailers’ inability to pass on price increases amid intensified bargain hunting by consumers.”
Mkhwanazi said their expectations of lower interest rates combined with strong unsecured credit lending will provide auxiliary support for consumer spending.
“This, however, is counteracted by the persistent pressures on consumers’ discretionary income, via weaker labour markets and higher income taxes,” he said.
Seasonally adjusted sales decreased 0.9 percent compared with July, following month-on-month changes of 0.2 percent in July and 0.7 percent in June.
StatsSA, however, said the seasonally adjusted sales increased 0.7 percent in the three months ended in August, compared to the corresponding quarter.
The retail inflation rose moderately to 2.9 percent in August, but was still notably below consumer price inflation.
Investec economist Lara Hodes said August’s modest reading was reflective of a still-constrained consumer demand environment, underpinned by muted economic growth.
Hodes said rising unemployment amid weak economic growth over the past 10 years had gradually weakened consumers’ financial health, with consumption growth likely to remain constrained in the near term.
“Retailers are embracing new technologies and improving in-store experiences to increase foot traffic, however consumers continue to be plagued by structurally high unemployment rates amid a sluggish labour market,” Hodes said.
“This, coupled with muted rates of household credit extension and rising administered prices and other taxes, continues to dilute consumers’ purchasing power.”