Retail trade sales surprised on the downside in August due to lingering effects of the July unrest, pointing to the unevenness of the recovery in the South African economy in the third quarter. Picture: Zanele Zulu/African News Agency (ANA)
Retail trade sales surprised on the downside in August due to lingering effects of the July unrest, pointing to the unevenness of the recovery in the South African economy in the third quarter. Picture: Zanele Zulu/African News Agency (ANA)

Retail sales on the downside in August, following the unrest and pilfering in July

By Siphelele Dludla Time of article published Oct 14, 2021

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RETAIL trade sales surprised on the downside in August due to lingering effects of the July unrest, pointing to the unevenness of the recovery in the South African economy in the third quarter.

Data from Statistics South Africa (StatsSA) yesterday showed that retail trade shrank 1.3 percent from a year earlier in August, dragged lower mainly by general dealers and retailers specialising in hardware, paint and glass.

This followed an upwardly revised 1.2 percent fall in July, and defied market estimates of a 2.6 percent rise in August.

This was also the second consecutive decline in retail activity since March, partly due to the lingering effects of recent violent events across the country and the protracted lockdown restrictions.

Nedbank senior economist Nicky Weimar said retail sales surprised on the downside in August, with the effects of the social unrests, lockdown and supply chain disruptions having a more pronounced impact than was generally anticipated.

Weimar said the impact of these events will linger until businesses are restored to full capacity, over the medium term.

“Improvements on the jobs front and the ability to limit restrictions on economic activity will be vital in rebuilding demand,” Weimar said.

“Easier lockdown restrictions and favourable interest rates will offer support to the sector's recovery, particularly as the year-end shopping season approaches.

“However, long-standing structural constraints such as power supply shortages, and the anticipated further waves of Covid-19 infections, will contain the recovery.”

The retail sales data completed the picture for South Africa's economic performance during August after manufacturing production rebounded, but mining production rose at a slower pace.

On a monthly basis, StatsSA said retail trade grew 4.9 percent, the most since February, reversing a downwardly revised 11.1 percent slump in July.

This means that volume sales for the three months ending in August were 4.1 percent lower compared to the three months prior.

However, year-to-date volume sales were 8.9 percent higher compared to the same period in 2020, though still 1.5 percent below 2019 levels.

FNB senior economist Siphamandla Mkhwanazi said this was concerning as it suggested that retail trade will likely have a negative contribution to the third quarter economic growth.

Mkhwanazi said the August retail sales volumes show that the impact of the riots on the sector might be bigger than initially thought.

“Going forward, however, improved roll-out of income support grants, combined with some improvement in consumption credit uptake, should be supportive of retail sales volumes,” Mkhwanazi said.

“Furthermore, recent growth in non-labour income, such as dividend income, should provide additional support.

“However, these must be weighed against the still depressed consumer sentiment and the slow readjustments in the labour market.”

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