Retail sales for July marginally declined to 2 percent year on year as sales growth continued to reflect a muted demand in South Africa, with consumers’ discretionary income under strain. File Photo: IOL
JOHANNESBURG – Retail sales for July marginally declined to 2 percent year on year as sales growth continued to reflect a muted demand in South Africa, with consumers’ discretionary income under strain.

Retail sales in June rose 2.4 percent year on year.

Statistics South Africa said on Wednesday that all categories contributed positively to the July print, except the hardware, paint and glass category, which continued to slide.

The largest annual growth rates to the headline outcome were recorded for retailers in pharmaceuticals and medical goods, cosmetics and toiletries, textiles, clothing, footwear and leather goods, household furniture, appliances and equipment.

Online retail, which falls under the other retailers’ grouping, continued to grow, disrupting traditional retailer models.

The seasonally adjusted volumes moderated by 0.2 percent in July, versus 0.7 percent in June, and a 0.1 percent decline in May.

FNB economist 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, demonstrating retailers’ inability to pass on price increases,” Mkhwanazi said.

He said looking ahead, FNB’s expectation of lower interest rates combined with households’ appetite for credit would provide auxiliary support for consumer spending.”

Mkhwanazi said this, however, would be countered by the persistent pressures on consumers’ discretionary income, via weaker labour markets and higher income taxes.

Investec’s economist Lara Hodes said rising cost-push pressures, coupled with persistently low retail inflation readings, against a backdrop of challenging economic and trading conditions continued to weigh heavily on retailers’ profits.

“Consumer sentiment remains depressed and this combined with an unemployment rate that has crept up to its highest level in a decade, continues to hinder household consumption expenditure,” Hodes said.

Hodes said government regulatory efficiency needed to improve substantially to aid the ease of doing business in South Africa.

BUSINESS REPORT